Using Our Tax Refund on a Car (2024)

FAQs

Using Our Tax Refund on a Car? ›

Utility bills, groceries, gas, rent or mortgage payments, insurance; everything takes its toll from your hard-earned savings. That's why using your tax refund for a down payment on a car loan is one of the best ways to secure a great auto loan.

Utility bills, groceries, gas, rent or mortgage payments, insurance; everything takes its toll from your hard-earned savings. That's why using your tax refund for a down payment on a car loan is one of the best ways to secure a great auto loan.

Pay Down Your Debt With Your Tax Refund

Personal debt and car loans also may have higher interest rates. Use of your tax refund to lower or pay off credit card debt can help minimize the unnecessary interest payments. If possible, it is strongly suggested to fully pay off your credit cards as bills come in.

Your tax return may show you're due a refund from the IRS. However, if you owe a federal tax debt from a prior tax year, or a debt to another federal agency, or certain debts under state law, the IRS may keep (offset) some or all your tax refund to pay your debt.

Buying a car can help with taxes. Even if you only use your car for personal use, you can deduct the sales tax you paid for your vehicle. However, you have to itemize to do so. You also cannot write off sales tax if you already took a deduction for your state and local income tax.

By paying off the loans with the highest rates first, you pay as little as you can in overall interest. And if you've already built an emergency fund and paid off your debt, you'd still probably be wise to put your tax refund toward a financial goal rather than splurging, Kullberg says.

Around 23% of consumers expecting a refund plan to use their tax refund on something "fun," the survey found, while 19% plan to invest it and 3% plan to donate it. Around 12% are undecided on how they will spend it.

Answer: The IRS Hardship Program, also known as the Currently Not Collectible (CNC) status, is a program that provides temporary relief to taxpayers who are experiencing financial hardship and cannot afford to pay their tax debt.

All or part of your refund may be offset to pay off past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or other federal nontax debts, such as student loans.

Who can take money out of my tax refund? ›

The Treasury Offset Program (TOP) is administered by the United States Department of Treasury's Financial Management Service (FMS). It allows federal and state government agencies to collect outstanding debts owed to them by garnishing, or offsetting, your debt with your tax refund.

If you're a business owner, or self-employed, you can deduct your business-related car expenses using a Schedule C (Form 1040) Profit or Loss from Business. If you're a farmer, you can use a Schedule F (Form 1040) Profit or Loss from Farming to deduct your farming-related vehicle expenses.

Buying a vehicle for business use tax deduction (Section 179) One type of tax deduction you can claim relating to business vehicles is Section 179. A Section 179 deduction helps offset the purchase cost of business property, including vehicles, equipment, and machinery.

Specifying more income on your W-4 will mean smaller paychecks, since more tax will be withheld. This increases your chances of over-withholding, which can lead to a bigger tax refund. That's why it's called a “refund:” you are just getting money back that you overpaid to the IRS during the year.

The IRS can use the funds from your tax refund to satisfy different types of debts, including unpaid taxes, overdue child support payments, defaulted federal student loans, or other federal or state debts owed by you.