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.
Step-by-step instructions on how to make a return
To compensate for VAT, you need to prepare a certain package of documents and contact the Federal Tax Service at the place of registration of the company as a tax payer.
Drawing up a declaration
The basis for compensation of VAT expenses is a tax return, which is drawn up in the form approved by order of the Federal Tax Service of the Russian Federation dated October 29, 2014 No. ММВ-7-3/558.
The document consists of a title page, which contains information about the payer, and sections that include data on various areas of the payer’s activities.
The payer is responsible for the accuracy and completeness of the information. To avoid problems when preparing a declaration and to have legal grounds for claiming a VAT refund, you need to regularly and correctly keep records of invoices. Their presence is the basis for the legality of VAT calculation.
The tax return is a standard form that contains the necessary sections and wording. They cannot be adjusted. All data in the document is displayed in the form of numbers.
Submission of documents
The declaration is sent through the user’s personal account on the Federal Tax Service website. Documents confirming the validity of the application must be attached to the declaration. If you buy a car, these will be:
- contract of sale;
- vehicle acceptance certificate;
- Receipt of payment.
The declaration must be submitted by April 30 of the year following the reporting year - the one in which the vehicle was purchased.
Desk verification of documentation
The submitted documentation is subject to detailed analysis by the Federal Tax Service . It is carried out within two months from the moment of application (Article 88 of the Tax Code of the Russian Federation). During the audit process, the tax authority may request additional information. All documents are sent electronically. If, as a result of the inspection, violations were revealed, the Federal Tax Service authority will be required to notify the applicant in writing or electronically within 10 days after the inspection.
Making a payment decision
The decision on VAT compensation is made by the Federal Tax Service within 7 days after the inspection (clause 2, article 176 of the Tax Code of the Russian Federation). The payer must be properly informed about the results of consideration of the application. The notification must be received by the interested party within 5 days from the end of the inspection.
Tax refund
Compensation for VAT is paid by the treasury authority. The basis for payment is the decision of the Federal Tax Service. The funds must be transferred to the payer’s account within 5 days from the moment the Treasury receives the specified decision with simultaneous notification of the Federal Tax Service (clause 8, article 176 of the Tax Code of the Russian Federation).
In case of violation of the deadlines, penalties will be applied to the guilty person. They are expressed in the accrual of interest on the principal amount, based on the size of the refinancing rate of the Central Bank of the Russian Federation. Accrual begins on the 12th day after completion of the desk audit.
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.
Basic options for saving
1. If the vehicle was sold for an amount of up to 250 thousand rubles, then the profit received is not subject to taxation - despite the fact that the seller made a profit. But if you owned the car for less than 3 years, you will still need to send a declaration to the Federal Tax Service. At the same time, it is not recommended to deliberately underestimate the cost of a car - Federal Tax Service employees will detect this and bring the violator to justice.
2. If the seller has owned the car for more than 3 years, he does not need to pay tax.
3. If the car was owned for less than 3 years, you will need to send a 3-NDFL declaration indicating the sale price. If there are documents that confirm the sale of a car is more expensive than its purchase, then the seller pays 13% personal income tax on the difference.
Offsetting as a way to save
If in the past year a person sold a car and bought property, then you can use mutual deduction - mutual coverage of one tax by the second. If you purchased housing for 1.5 million rubles and sold a car for the same amount, you must pay 13% from the sale of the car, and then return it as a deduction from the purchased apartment.
You can use the mutual deduction only 1 time.
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.
How is the deduction amount calculated?
If the taxpayer purchased an apartment, a private house, paid for construction or took out a loan for these purchases - up to 2 million rubles, then an amount of up to 260 thousand (13% of the purchase price) is returned.
Such calculations do not work with a car, since there is no deduction for the vehicle.
How to get 13 percent back from buying an apartment
Calculation example
If a person sold a car for 300 thousand rubles, but the certificates and papers confirming the purchase were lost, then it is possible to use a deduction of 250 thousand rubles and pay 13% on 50 thousand (300 – 250 = 50). If there is documentation (for example, the car was purchased for 280 thousand), then 13% is calculated from 20 thousand rubles (300 – 280 = 20).
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.
Refund when buying a car
The purchase of a car is not included in the list of items for which a deduction is due. This is stated in Article 220 of the Tax Code of the Russian Federation. For other cases, the possibility of a 13% refund remains available. This is also true when selling a vehicle.
Who is entitled to a refund?
The number of citizens entitled to receive a tax deduction for a car includes those who consistently declare income and also repay payments in a timely manner in the form of 13% of their amount. However, this only applies to transactions related to the sale of a car. When purchasing a vehicle, it will not be possible to return the property interest, regardless of belonging to preferential categories.
Three year rule
Despite the fact that the new version of the law does not provide for an income tax refund when purchasing a car in 2021, there is an opportunity to save significantly. To do this, you need to know the specifics of taxation of vehicles, taking into account their cost and period of ownership.
Attention! If the purchased used car has been in use for more than 3 years, it is not subject to tax, regardless of the price. Payment is made only if the car has been owned for more than 3 years and costs more than 250 thousand rubles.
List of documents
In order to carry out any income tax transactions, including obtaining a property deduction when purchasing a car in 2019, you need to make sure that you have the necessary documentation. Otherwise, it becomes impossible to prove the right to a refund of the amount spent.
What papers are needed:
- Vehicle passport (which must contain information about the transaction).
- Car purchase agreement (with paid price).
- Payment receipt (if the car was purchased at a car dealership).
- A receipt issued to the driver when he paid personal income tax.
- A copy of the passport of a citizen of the Russian Federation.
- TIN.
It is important to know! Provided there are no changes to the new law, you cannot receive a tax deduction when buying a car in 2021. However, you can exercise your right to financial compensation or benefits if you sell your car.
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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Didn't find the answer to your question? Find out how to solve exactly your problem - call right now: +7 (Moscow) +7 (812) 309-53-42 (St. Petersburg) It's fast and free!
