Buying A Car To Reduce The Amount Of Tax You Pay
Can buying a car really reduce the amount of money you will have to pay in taxes?
The answer to this question is not a simple one but it may be worth looking at your situation to see if a car could be used to reduce your yearly tax payments. Everyone could stand to pay a little less in taxes right now, especially with the worldwide economy in shambles. Depending on your specific situation, you may be able to reduce your tax payments with your car.
Do You Run Your Own Business?
If you run your own business, or you yourself are the business and you use a car for daily business needs, then you may be able to claim your car as a tax write off. There are several financing options and leases for cars used for business purposes, and these could help you to pay less tax on the car itself or pay less tax on your income. Because these options are specific to the business type and how the company earns money, you will have to speak with an accountant in order to be sure that you can use the car for tax purposes.
Do You Use Your Car For Business?
Many of us use our personal cars for business activities often. This can include driving to meetings and consultations, as well as moving merchandise or performing labour. It may not count if you only use your personal vehicle to drive to and from work. If you use your car for at least 50% business, you may be able to file for tax benefits or get a tax break on your lease.
Does Your Company Offer Salary Packaging?
Many companies are using salary packaging benefits to attract employees. These packages can help reduce your taxable income by including the price of a lease and other car related expenses as part of your salary. The company pays for your lease out of your pre-tax salary, meaning that your taxable salary is less. These are often referred to as Novated Leases. This increase in benefits to the employee doesn’t translate to a higher cost to the employer and the employee enjoys tax breaks and the use of a car. This leasing system may still require that you pay a Fringe Benefits tax, so it is important to talk to your accountant to determine if a salary package for a car will end up reducing the taxes that you owe. Taking the time to research if you can use a car to pay less on your taxes may end up being worth the extra money that you save.
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