Taxes and Deductions: Should Car Purchases Be Included in Your Tax Return?

Purchasing a car is not directly considered a deductible expense in the Income Tax Return for most taxpayers. However, there are some exceptions and important considerations to keep in mind.

Generally, buying a car is not directly reflected in the Income Tax Return. However, taxes associated with the purchase and possible deductions for self-employed individuals and people with reduced mobility can influence the outcome of the return.

If you are self-employed or own a business, you can deduct certain car-related expenses, such as depreciation, fuel, insurance, and maintenance, provided the vehicle is used for economic activity.

People with reduced mobility can benefit from tax deductions and exemptions when purchasing adapted vehicles. Additionally, there are state and regional incentives and deductions for buying electric vehicles.

On April 2, 2025, the window opens for submitting the 2024 Income Tax Return, which will close on June 30. This year, for the second consecutive year, a 15% IRPF deduction is available for purchasing an electric vehicle, an extended-range model, a fuel cell vehicle, or a plug-in hybrid. This allows for a 15% recovery of the vehicle's value, with a maximum deductible amount of 3,000 euros. This measure also includes quadricycles and motorcycles. Similarly, a deduction of up to 15% (with a limit of 4,000 euros) is possible for installing a charging point at home.

Another group benefiting from some form of tax relief includes people with disabilities or those caring for them, who can deduct 50% of the VAT on the purchase of a new car. It is important to note that, in these cases, the VAT paid on a vehicle purchase is already 4% instead of 21%, making the amount relatively small. Additionally, the discount only applies to new vehicles, excluding any other options, whether used, nearly new, or zero-kilometre vehicles.

According to coches.net, self-employed professionals using the purchased car for work can deduct 50% of the instalments (capital and interest) paid during the year in question, as well as 50% of the VAT, whether the car is bought outright or leased under new rental models like leasing.

For certain professionals who use the car not for commuting but as a regular work tool, a full VAT deduction is possible. This includes professionals such as taxi drivers, private transport drivers, sales representatives, or transporters. This group also includes self-employed driving instructors. In all cases, the car must be registered in the name of the self-employed professional filing the return.

Similarly, maintenance expenses and up to 50% of fuel costs can be deducted, except for transporters and taxi drivers, where this deduction can reach 100% if the fuel is used for work purposes.

Government grants for purchasing new vehicles under the Plan Moves III must be declared to the tax authorities as a capital gain and are therefore subject to taxation. These amounts will increase the taxable base, which will be taxed according to the tax brackets.

Finally, in the case of company cars, it is the companies that can deduct part of their cost. If the car is also used privately by the employee, the tax authorities consider it a benefit in kind, which the vehicle user must declare as additional income.

If the car used is registered in the company's name, the tax authorities consider that the employee must declare 20% of the annual acquisition cost of the car as income in kind, and therefore, this amount must be added to the work income received throughout the year. If the car is owned by a third party (such as an external leasing company), this 20% will be calculated based on the market value of the vehicle.

If the car in question is electric or a plug-in hybrid with an electric range of more than 15 km, a 30% discount will be applied to the amount to be declared, provided the car's price is less than 40,000 euros. If the car is a hybrid, the reduction is 15%, and if it is a diesel or petrol car emitting less than 120 g/km and costing less than 25,000 euros, a 15% deduction can be applied to the fixed amount.