There are a lot of rumors surrounding the tax deduction associated with the purchase of a car. Some argue that the state returns almost 250 thousand rubles, others say that such a deduction is simply not provided for by law. Let's try to understand this issue - and determine what exactly and who is entitled to taxes.
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The concept of tax deduction when buying a car
First of all, you need to understand what exactly a tax deduction is. To do this, you need to refer to the Tax Code (TC) of the Russian Federation, and specifically to Art. 220, concerning property deductions for personal income tax.
According to the provisions of this article, when determining the amount from which a citizen will pay this tax (tax base), deductions may occur. In this case, personal income tax is paid in a smaller amount.
The main thing to remember about deductions is that only those people who pay tax in Russia at a rate of 13% can receive them.
That is, persons who received income from won prizes, from interest-free loans, as well as most non-residents (that is, living abroad most of the time) cannot claim deductions.
Types of tax deduction
The current Tax Code provides for the following types of tax deductions:
- Standard. They are provided to disabled people, victims of radiation accidents, veterans and disabled people of the Great Patriotic War, blockade survivors, Heroes of Russia, bone marrow donors and a number of other categories. In slightly different amounts it is given to parents, adoptive parents and other persons caring for children.
- Social. Here, expenses for charity, personal training, etc. are deducted.
- Investment. Those who have invested in special types of securities are encouraged here.
- Professional, that is, related to the performance of one’s duties in the profession and the expenses incurred because of this.
- Property.
It is the latter that are usually remembered when talking about taxes in connection with the sale or purchase of a car.
Who is entitled to a 13% interest refund?
A bill is being considered in the State Duma that proposes introducing a new personal income tax deduction in the amount of 13% of the amount of expenses for purchasing a car. It is assumed that the deduction will be available to citizens who purchased a new (not used) Russian-made passenger car for family or personal needs. The total amount of expenses is strictly up to 1 million rubles. The largest planned deduction amount is 100 thousand rubles.
If the bill is adopted, then taxpayers will be able to return 13 thousand rubles from the budget.
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The following rule was also established: if a person took advantage of such a deduction, he will be able to receive it again in the future, but at least 5 years must pass from the date of the previous application for a refund.
This law is attractive to the state in the sense that it will encourage citizens to purchase domestic cars, developing the Russian automobile industry.
Who is entitled to benefits?
In addition to deductions, there are also situations in which a citizen will generally be exempt from having to pay personal income tax on certain types of income. These cases are already regulated by Art. 217 of the same normative act. Their list is quite extensive.
In particular, this includes:
- benefits from the state (with the exception of payments for sick leave and care for a sick child);
- pensions;
- compensations that were paid in cases established by law;
- payments to volunteers engaged in charitable activities;
- alimony payments;
- scholarships;
- profit of peasant farms in the first five years of operation;
- income of residents from the sale of real estate and shares in it, as well as property that people owned for more than 3 years (with the exception of securities and income of individual entrepreneurs from the sale of what they used in business).
The list here is not complete, but you need to pay special attention to the last point when dealing with a car.
Is there a deduction when selling a car?
So, is a citizen entitled to a reduction in the personal income tax base if he buys a car? Unfortunately no. There is no such discount in any of the cases provided for by law.
It concerns only real estate - and a car, even the most expensive one, already belongs to movable property. Consequently, the buyer cannot count on anything in this case.
But the seller is directly affected by the benefits discussed just above. In cases where his car is older than three years, and has been his property all these years, he has the right not to pay personal income tax.
In this case, the declaration is not submitted at all. But even if the car is newer or was purchased less than three years ago, the seller still has the right to count on a tax discount.
How to calculate the amount of tax deduction?
Having sold a car that spent less than 3 years with the previous owner, a person is obliged to pay tax. This is due to the fact that he received income - and the state in this case does not consider it necessary to somehow limit taxation. However, there are certain nuances here:
- When the transaction amount is less than or equal to a quarter of a million rubles, personal income tax is not paid. However, a citizen is not exempt from filing Form 3-NDFL.
- If the cost is more than 250 thousand, but the receipt or receipt from the previous seller from whom the citizen bought this car has not been preserved, then the tax base is reduced by this amount, and personal income tax is paid in the amount of 13% of the difference.
- If documents confirming the purchase price have been preserved, tax is paid on the difference between the purchase and sale prices. For example, if a person bought a car for 300 thousand, and sold it for 310, then he will pay tax not on 60, but only on 10 thousand rubles.
The rules regarding the latter case also apply when there is not just a sale of a car, but its replacement - that is, a new car is immediately purchased. In this case, expenses incurred for the purchase are not taken into account - as shown above, the buyer does not have a deduction.
Is it possible to get income tax back on a car purchase?
There is a misconception that when buying a car you can get 13 percent back. In fact, the right to a 13% refund applies to those citizens who purchased real estate, paid for education or medical services. Since the car is not on the list of essential items, it is not eligible for a 13% refund.
Tax benefits for a car are established when it is sold and income is received from the transaction. For each profit from the sale of property, you must pay 13% income tax. But if the vehicle has been owned for at least 3 years, then you do not need to pay personal income tax, just like you do not need to prepare a declaration to the Federal Tax Service.
The period is calculated as follows:
- when purchasing – from the moment of completion of the purchase and sale transaction;
- in case of inheritance - from the date of death of the testator;
- in the case of a gift agreement - from the moment of signing this agreement.
How to properly file a deduction?
In order to make a deduction, a citizen must perform the following actions:
- collect documents related to the transaction;
- make calculations using the most profitable scheme for yourself;
- prepare a declaration in form 3-NDFL. Samples and examples of filling can be found on the official website of the Federal Tax Service of the Russian Federation;
- submit documents along with the declaration by April 30 of the following year. In 2021, you are allowed to submit until May 2, since the last day of the deadline fell on the weekend. You can submit it during a personal visit to the Federal Tax Service at the place of registration, or through the Gosuslugi portal, if you are registered there.
Required documents
What documents are required to pay the tax associated with the sale of a car? Here is their list:
- Sales agreements or certificate-invoices under which the car was sold.
- A copy of the title for the vehicle that was sold.
- Receipt for payment of the amount when purchasing a car.
- Car purchase agreement.
That's all the taxpayer needs. That is why these documents must be preserved: it is not a fact that the Federal Tax Service will pay attention to you and start checking you, but if you fail to pay, a penalty will be imposed.
Do I need to file a tax return?
The buyer cannot return the 13 percent upon purchasing the vehicle. But, despite this, he needs to carefully monitor all documentation that relates to the car. This is necessary so that in the event of a subsequent sale, the citizen can return the property tax.
The declaration is submitted only when selling a car, and when purchasing such a document is not sent to the inspectorate. But legal entities are required to report to the tax authorities on almost all of their income.
So, an income tax refund when buying a car is impossible, but the seller can issue one. He will need the following documents:
- passport;
- statement;
- declaration 3-NDFL;
- vehicle purchase and sale agreement;
- paper confirming payment;
- documents on a previously completed transaction.
The entire package is submitted to inspection by April 30 of the current year.
Attention! A refund is possible if the seller owned the car for no more than 3 years. The deduction amount should not exceed 250 thousand rubles.
Is it possible to get a tax deduction when buying a car on credit?
Separately, it should be said about the situation when a car is purchased on credit or with borrowed funds. Many car owners are convinced that in this case they should certainly receive some benefits from the state.
And indeed, back in 2015, some Russian politicians proposed stimulating the domestic auto industry in another way - that is, by providing benefits to those who take out a loan to purchase Russian cars.
However, as of June 2021, such a bill has not even been considered. Until tax laws are changed, buyers will not have any deductions for car loans.
Thus, it can be seen that the popular opinion about tax deductions for the buyer in relation to cars is completely wrong. The state stimulates those who buy certain types of real estate - but not car owners.
However, the situation is much better for sellers: they have the right to count on certain benefits. But at the same time they need to comply with the established procedure for paying taxes.
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Basic facts about the tax deduction
A tax deduction is an amount of money reimbursed for tax previously paid for a certain reporting period. The funds are returned to the payer from the regional treasury. At the moment, there are several options for compensation of expenses associated with the acquisition of various types of property. However, this does not include the car tax deduction.
Categories of expenses that are reimbursed to citizens at the expense of the state:
- Individual housing construction.
- Reconstruction, major repairs of a residential building.
- Repayment of mortgage loans.
- Costs incurred in obtaining higher education.
- Payment for services of medical institutions.
- Formation of a material fund for future retirees.
Thus, receiving state compensation becomes possible in different cases and situations. But at the moment, the car tax deduction in 2021 is not approved by law and is valid only for the sale of a vehicle. The existing restriction is explained by the fact that a car is not an essential item, unlike housing, real estate repairs, and the cost of medical procedures.
Legislation
You can find the answer in the Tax Code of the Russian Federation:
- The following is a list of property for which you can receive a deduction.
- If we rely on subparagraph 3 of paragraph 1 of Article 220 of the Tax Code and, this list does not contain information about vehicles.
- Letter No. 03-07-14/45360 of the Ministry of Finance of the Russian Federation dated July 17, 2017 regulates the procedure for VAT refund to legal entities.
In 2015, deputies of the LDPR party prepared a bill to include transport in the list of property for which income tax can be refunded. But at the same time a certain list of criteria was compiled:
- The car must be new.
- The car was produced by a domestic plant or it is a Russian-assembled foreign car.
- The amount of payments cannot exceed 500 thousand rubles.
- Reimbursement is a one-time event.
A list of brands and models purchased by a citizen for the first time at a car dealership was compiled. Thus, the creators of the bill wanted to stimulate consumers to buy domestic cars for the development of the Russian automobile industry.
However, the amendment has not yet been adopted. If it is reviewed and approved in 2021, it means that payments will begin to be made from this period, but for now there are no changes in the law.
For reference! According to the law, you cannot get a deduction for buying a car, you can only get it for selling it.
