Car loan interest belongs on Line 16b, interest, other.
Why line 16b
Interest is the cost of financing the vehicle, not the cost of operating it, so it does not belong on line 9. A self-employed person deducts the business-use share of interest on a vehicle loan on line 16b, interest other. This holds even when you use the standard mileage rate, because that rate covers operating costs and depreciation, not interest.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so car loan interest lands on Line 16b without you sorting it.
Start for freeWhat car loan interest is confused with
- Line 9, car and truck expenses
- Operating the vehicle, including gas, insurance, repairs, parking and tolls, is line 9; the interest inside the finance payment is line 16b.
- not deductible, not deductible
- The principal portion of the payment is not an expense at all, and interest on a vehicle used only personally is not a business deduction.
- Line 16a, interest, mortgage
- Line 16a is mortgage interest paid to banks on real property; a vehicle loan is other interest on line 16b.
Examples that belong on line 16b
- $1,240 of interest on a van loan where the van is used only for work
- 70 percent of $900 of interest on a car used 70 percent for business
- Interest on a truck financed for a landscaping business
- The interest figure shown on the lender's year-end statement for a work pickup
What does not belong here
- Principal repayments, which are not deductible
- The whole monthly payment, which mixes principal and interest
- Interest on a car used only for commuting and family driving
The limit that applies
Deductible at the business-use percentage, and claimable whether you use the standard mileage rate or actual expenses, because interest is not part of the standard rate.
What to keep
Keep the lender's annual interest statement or the amortization schedule, plus the mileage log that fixes the business-use percentage.
Other expenses on line 16b
| Expense | Line |
|---|---|
| a merchant cash advance finance charge | Schedule C, Line 16b |
| business credit card interest | Schedule C, Line 16b |
| business loan interest | Schedule C, Line 16b |
| interest on a personal loan used in the business | Schedule C, Line 16b |
Related lookups
- Where does business mileage go on Schedule C?
- Is a car payment deductible on Schedule C?
- Where does business mortgage interest go?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so car loan interest lands on Line 16b without you sorting it.
Start for free