The answer to this is much like the answer to most deduction-related questions: If the proceeds of the title loan went to a business expense of some sort, then you may claim the expenses of carrying out the loan on your taxes, including interest and fees. Tax deductible title loans include those that are carried out on any water- or land-based motor vehicle to support, supply or start up a business, provided you can submit evidence of these expenses to the IRS. The only catch is that you can’t claim a deduction on a loan for personal purposes or any non business-related investment.
Here’s a list of situations where you can claim a deduction on title loans:
The trick is distinguishing business expenses apart from personal ones. If you’re a freelance writer for a brokerage platform, you can use the loan money to afford yourself a laptop that provides the means of running your business in that manner. You can also claim deductions on the loan if the money was used for the vehicle and its gas expenditure during business trips. Of course, this means that you can’t claim deductions on car title loans in Houston for the following:
The IRS takes a chunk of your income on every deposit or check you receive that isn’t designated as 1099 income. You can claim more of this money back into your pocket on your tax returns by filing your taxes with deductions on business expenses. Naturally, people often take out loans to come up with the money for starting a business, and since the IRS is partial to the growth of business as a whole, they provide cuts for people who show that their income is being used in this manner. That income includes, of course, title loans.
This boils down to bigger tax returns in the long run, which can significantly help with the continued growth of the business that received the investment as well as the personal expenses of the individuals who contributed to it. The reason the IRS likes business growth is because it leads to bigger income, a better economy, and therefore higher influx for the IRS itself. Think of the deductions as a pat on the head for helping them out. Tax deductible title loans are encompassed in this as much as any other business expense.
There’s nothing in particular to look out for when claiming on tax deductible title loans. As with any other deduction that you file, be sure to provide receipts or other forms of evidence that prove the loan money was spent in the manner that you claim. As such, you also want to be sure that you’re claiming a fair cut of the loan’s cost on your taxes in the event that only some of the loan money was actually spent on a business development.
Also keep in mind that all expenses on deductible title loans are eligible for deduction. This means that fees and interest rates are accounted for, and all records of these expenses should be kept. One reason title-based lending companies prefer to have your email address on file is to help you stay on top of your payments and all record-keeping that comes with them.
Remember that filing faulty deductions or listing frivolous claims on your taxes can incur severe penalties from the IRS. This is true for all deductions, not strictly auto loans. We *strongly* recommend that you work closely with a licensed tax consultant when working out what you can deduct your loan expenditures on and by how much.
At the end of the day, tax deductible title loans boil down to whether or not you can furnish the IRS with proof that the loan money went toward business expenses. If you can't, then you won't be able to write off your loan expenses, including fees and interest charges. You're strongly encouraged to work with a tax professional to be sure that the expenses covered by your title loan can be claimed, as the IRS doesn't necessarily define "business" the same way everyday people would.
As a final note, if you're looking to take out a title loan for student expenses, your best bet is to seek out a financial aid program for a grant or loan. The specific assistance programs that you'll turn to will depend on the college or university that you're applying to as well as which state it operates out of.