Top Ways to Save On Taxes With Your Car

We're there again, that part of the year when the bony finger of Uncle Sam slips its way into your wallet and takes what it deems to be a fair share of your hard earned money. That's right, it's tax season. That time honored tradition of putting everything off until the last minute then filing as close to midnight on April 15th as possible will be once again in full glory, and local TV will once again run 11PM news coverage of the blessed event. But how about we talk about lowering those taxes the only way we know how *— with your car.

Donate that old Jalopy to charity
Seeing old cars go is sometimes a heart wrenching experience. You babied that old Dodge Monaco through thick and thin, and she did you right, but it's time for the relationship to end. Instead of going through the hassle of listing it in the want ads and inspecting potential buyers to make sure they'll take good care of her, why not just donate it to charity? It is after all just a car, and if you let them haul it away you'll get to claim 100% of the auction value the charity receives on the car against your taxes — if it goes for more than $500. Okay, so maybe half a grand isn't a lot and you can't use this one unless you exceed the standard deduction, but every little bit helps.

Buy a hybrid
In the zeal to encourage the population to buy into a technology both unproven and dubiously implemented for fuel economy, the Federal government offers a tax credit to those who buy hybrid cars like the Ford Escape. The credit varies based on number of manufacturers vehicles on the road and fuel economy so choose wisely.

Buy the opposite of a hybrid - a giant truck
Despite changes to the law in 2004, the tax break for businesses that purchase pickups with a GVW over 6000 lbs still exists, as well as the break for buyers of expensive SUVs. The only catch is the maxiumum value can't exceed $100k and the first year deduction has been reduced from almost 100% to somewhere around 75%, pity. Regardless, if you're a small business owner trying to make the balance sheet read zero, here's a good way to have your cake and eat it too.

Use your car for work - and claim it
If you're work sees you driving your personal car frequently, you can deduct a raft of expenses not covered by your employer. Mileage is normally reimbursed by the employer, but if it isn't that can be deducted, as well as a portion of maintenance, and upkeep.

Depreciate it as an asset
If you own a small business, you can claim your car as a business asset. Of course, this is subject to usage rules under the 179 exemption of 50% or greater usage for work, but as an asset, a car has a depreciation schedule just like anything else in a business. The only trick is to define the useful life of the vehicle properly so you don't end up with a rattly bucket of bolts you have to hang on to for tax purposes.

Unfortunately, to take advantage of those big breaks you'd have to complete transactions by December 31st of last year. Still, mileage and wear and tear deductions can be used — if you've kept you're receipts that is.
Read more at: WWLaw, GooGoBits, IRS.gov

*Always consult with a licensed tax professional. We're not licensed tax professionals. We're automotive journalists. We know you get confused.