Cover Your Costs With Vehicle Tax Deduction

If you have purchased a clean fuel vehicle, containing a gasoline engine and an electric motor, or a vehicle which runs on electricity, you can benefit from a tax deduction on your car. You can get a one-time tax deduction up to $ 2,000 with the former, while the latter can get you a one-time credit on tax of up to $ 4,000.

For your car to qualify as clean fuel, make sure that it runs on one of the following fuels: natural gas, LNG, LPG, Hydrogen or any other fuel that is at least 85% alcohol or less. Don’t forget that although gasoline/electric hybrids use electric motors, they can’t receive tax credits for electric vehicles.

If your vehicle runs on two types of fuel, the cost required to adapt the car to a clean-fuel user can be deducted. This deduction however is subject to some limits.

In order to benefit from a tax deduction on your car, it must be a first hand purchase, and driven mainly within the United States. The car should be a four wheel drive which is not used for business reasons. If these conditions vary within 3 years of you buying the car, some of the money previously saved will have to go.

Regarding car donations, you might’ve seen several ads asking you to donate your car in order to receive a tax break. The offer is true in principle, but several things need to be considered. Firstly, the value of the donated car cannot be worth more than its current market price. Actually, the claimed deduction amount is the amount that a buyer would pay if the car was sold second hand.

Also, the deduction amount is dependant on the car’s value and how it is used by the charitable group. So, you won’t get an idea about the amount your charity will get you. Further, the organization to which the donation was made, must be eligible by the tax agencies.

If the charity sells the car at a lower price than the one you stated, then the deduction amount will be lower. On the other hand, if the charity sells your car after having used it, the value of your car at the time of donation will be the only amount which is relevant.

It’s a good decision to donate your vehicle to charity and what is best is that you too can benefit from the action.

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