Why is interest on car loans not tax deductable and interest on home loans are?

If I am able to take the interest paid on a house loan of on my taxes every year, why not my car loan. Both are tangible assets?

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  • 1 decade ago
    Best answer

    Yes, both are tangible assets, but this fact does not determine whether interest is deductible. Instead, you can deduct interest if it is a business expense, and there is a separate rule for homes. Apart from home loan interest, interest paid for personal, non-business expenses is not deductible.

    For example, if you owned a delivery business and you bought a delivery truck on credit for use exclusively in your business, you could deduct the interest payments on the truck loan. But that's not because the truck is a tangible asset; it's because the truck is used in your business.

    Congress created an exception for interest paid on home loans. You can deduct that interest even though it's not a business expense. That's because Congress wants to encourage home ownership.

    Whether an asset is tangible or intangible has nothing to do with whether the interest payment is deductible. Banks, for example, can deduct interest paid on their loans because banks are in the business of taking out and making loans. They can do this even though there is no tangible asset involved.

  • 3 years ago

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  • Anonymous
    1 decade ago

    The tax laws allow you do deduct interest on home loans but not car loans except for business use.

  • Anonymous
    1 decade ago

    I am old enough to remember when interest paid on consumer loans WAS tax deductible.. but the politicians stopped that back in the late 1970's and it killed the economy.. but most AmeriKans today aren't old enough to remember the time before they couldn't write off consumer loan interest.

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  • Bob F
    Lv 6
    1 decade ago

    Because Congress uses tax laws such as deductions and credits to legislate our behavior. They want you to buy a house so they give you tax advantages to help you do so. They know you will buy a car and borrow over your head to do so even without tax breaks, so they don't need to give you tax breaks for cars or credit cards. For the same reason, they give you tax breaks to produce children (future tax payers) or to start businesses (future tax revenue sources), etc.

  • Judy
    Lv 7
    1 decade ago

    Because that's how Congress wrote the law. They are apparently trying to encourage home ownership more than car ownership.

  • 1 decade ago

    Because that is what Congress decided.

    Before 1986, all interest was deductible. Even credit card interest.

  • Anonymous
    1 decade ago

    Because Congress said so.

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