Can I deduct car costs from my income?

Most of us use a car in our business. Here is everything we need to know to be able to deduct car costs.

1) Can I deduct car costs from my income?

Yes, but in a limited percentage. In fact, we can only deduct 20% of the costs related to the cars (for example the amortization of the purchase cost, expenses for fuel, maintenance, insurance, road tax, etc.). The percentage has been reduced from 1 January 2013: in the past it was 40%.

 

2) What is meant by “depreciation charge”?

Cars are a durable good, as we can use them for several years in our business. For this reason, the purchase cost cannot be deducted entirely in the year in which we become the owner of the car, but must be spread over 4 years, as the distribution coefficient established by tax regulations is 25%. The part that can be deducted in each year is called the “depreciation charge”.

Attention: there is a maximum amount on which to apply the depreciation rate, which is currently equal to 18,075.99 euros. Consequently, the maximum amount of amortization deductible each year is € 903.80 (18,075.99 x 25% x 20%).

 

3) Are there any cases in which it is possible to deduct 100% of the expenses?

Yes, but they are specific cases. In fact, the law allows to deduct 100% of the costs relating to vehicles used exclusively as capital goods in the company’s own business and the expenses relating to vehicles used for public use.

 

4) What are instrumental vehicles?

This category includes vehicles without which entrepreneurial activity cannot be carried out. For example, if we carry out car rental activities, the cars we rent to customers are considered capital goods for us. Or if we own a driving school, the cars we use to teach our students to drive are capital goods for us.

 

5) What are public use vehicles?

This category includes vehicles whose use is recognized by an act issued by the Public Administration. These are, for example, the cars used by taxi drivers, or those used by those who carry out the rental activity with driver. Also in this case it will be possible to fully discharge the costs related to these cars.

 

6) If I use a truck in my business, can I unload all expenses, or do the same limits apply as for cars?

It is possible to deduct 100% of the costs related to buses or trucks that are inherent to the business, i.e. that are directly related to the business from which the revenues derive. So, if we are building contractors and we use a car and a truck in our business, we can partially deduct the costs of the car, but fully those of the truck. If, on the other hand, we are the owners of a company that deals with removals, we can completely download the costs related to the van with which we transport our customers’ objects, while we can only deduct the costs related to the car we use to move from a customer to a limited extent. to the other.

 

7) If I am a sales agent, can I download the costs in full?

No, even if we are agents or representatives we have an upper limit on the deductibility of costs. In fact, we can only download 80% of the costs. However, for agents and sales representatives the maximum amount on which to calculate the depreciation is 25,822.84 euros.

 

8) If I give the car to an employee, can I deduct the costs?

Yes, if the car is licensed to employees for most of the year (i.e. for at least 183 days out of 365), 70% of expenses can be deducted. Also in this case the percentage has been lowered starting from January 2013: previously 90% of the expenses could in fact be deducted.

 

9) If I use a leased or rented car, can I deduct the costs?

Yes, but always in a limited way. In the case of leasing we can deduct 20% of the paid installments (calculated on a maximum amount of 18,075.99 euros), in the case of rental we can download 20% of the annual rent, calculated on a maximum amount of 3,615.20 euros.

 

10) If I use the minimum system, can I download the car costs?

Yes, but only half of it. If we fall back into the facilitated minimum regime, all expenses related to cars are always considered mixed use and consequently can be deducted at 50%. This is a presumption made by the tax authorities and from which we cannot escape. So even if we use the car exclusively for our work, and not for private purposes, we cannot deduct more than 50% of the expense.

 

 

by Abdullah Sam
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