Car tax

The new interest deduction on the purchase of a car can help people with poor credits scores the most. The average interest rate for those with poor credit scores is 15% and the loan period is 5.5 year so in a $50,000 car the interest will be $23,000. The law allows the buyer to deduct $20,000 in interest. The savings under the new law depends on the tax bracket. A single man making $50,000 would own $10,000 in tax so he could deduct $10,000 of his interest which would save him $2,000 in taxes. If he got a 7% loan the total interest paid would be $10,000 and he could deduct it all. About half the people who buy cars would not owe any income tax so there would be no savings for them. In most cases tax deductions and/or credits are no help to those who do not pay tax. The exception is the child tax credit and the earned income tax credit which is refundable even if you own no tax.