Disclaimer: LoanMart does not provide tax or accounting advice. The below information has been prepared for informational purposes only. You should consult your own tax and accounting advisors when filing your taxes or completing tax forms.
While some type of loans offer the benefit of tax-deductible interest, personal loans including auto title loans do not usually come with that benefit. The interest on a car title loan is typically not tax deductible.
When you get a car title loan serviced by LoanMart, we will work with you to come up with a payment plan that fits your budget.1 This makes your repayment terms benefit you, so you can pay off your car title loan balance quickly and minimize your interest charges. Being able to pay off your title loan faster may benefit you more than having tax-deductible interest.
What Types of Loans Are Tax Deductible?
The interest paid on some types of loans in the United States is designated as tax deductible. Available tax deductions exist for home loans, student loans and commercial loans, and are commonly referred to as home mortgage interest deduction, student loan interest deduction, and business interest deduction. The interest on these types of loans is fully or partially deductible in order to encourage home ownership, the pursuit of higher education and business activity.
Call Our Team
Take the first step and call our toll-free hotline to speak with a specialist.
Title Loans Serviced by LoanMart: Are They Tax Deductible?
While title loans serviced by LoanMart offer a very flexible borrowing process, one of the key requirements is that the loan proceeds are used for personal, family or household purposes.1 Therefore, from a tax perspective, car title loans are considered personal loans, and don’t fall into one of the loan categories that allow for the loan interest to be deducted from personal income. In regards to your taxes, no matter if you get a title loan through LoanMart or another title loan provider, a tax deduction is therefore not possible for your title loan interest.
Do Title Loans Affect Your Taxes?
Now that you know that title loan interest is normally not tax deductible, you might wonder if an auto title loan otherwise affects your taxes. Under normal circumstances, the answer is no.
While you don’t see a tax benefit from taking out a title loan since the interest is not tax deductible, there’s also no need to worry about having your taxes go up because of the loan. The funds you receive when borrowing against your car or truck are not considered personal income. They don’t need to be reported to the IRS and therefore don’t impact your personal income and income taxes.
When Can a Title Loan Impact My Taxes?
There is one specific situation that may result in an auto title loan having an impact on your taxes: if you fall behind on your payments and are not able to repay your full outstanding loan, your title lender or servicer may at some point discharge or partially cancel your debt. If your lender or loan servicer agrees to a settlement for less than the full amount owed, the amount that you don’t have to pay back may be considered personal income for tax purposes. You might receive a form 1099-C in the mail and be required to report the forgiven loan amount as personal income.
This scenario is however one you’ll want to avoid, since being late on your title loan payments can negatively impact your credit and also jeopardize your access to your vehicle. Instead, focus on how you can pay off your car title loan balance as quickly as possible!
The Bottom Line
Whether you live in a high tax state like California, or you’re a resident of low tax states like Arizona, Florida, Texas or Tennessee, an auto title loan usually doesn’t have an impact on your taxes.
