Is Car Insurance Tax Deductible?

Is Car Insurance Tax Deductible?

Car insurance

Having car insurance is not only a smart idea, but it is illegal to drive a vehicle without a valid auto insurance policy. However, the monthly costs can put a large hole in your savings. So maximizing your income tax deductions can save you a few more pennies. There are certain situations where you can deduct your car insurance costs from your taxes. Always consult with your accountant or a tax professional to make sure you are legitimately entitled to use the best options available.

Mentioned beloware a few situations when car insurance is tax deductible:

Self-Employed

If you are self-employed and drive your car for business purposes, you may be eligible for an auto insurance tax deduction. However, if you use your car for both personal and professional reasons, only the portion of expenses associated with business use is tax deductible and must be prorated accordingly. You can file Form 2106 under Employee Business Expenses and list yearly auto insurance premiums as an expense.

Employed

If you are an employee and use your car for business reasons, you are also qualified to deduct your car insurance tax. However, if your employer reimburses you for your auto insurance premium costs, you cannot claim these as a “business expense” on your tax forms. Check with your employer before filing the claim.

Not All Vehicles Qualify

According to the IRS, work-related driving vehicle should be a four-wheeled vehicle designed for use on public roads. It also specifically excludes certain specialty vehicles like taxis, moving vans and ambulances. Vehicles that weigh over 6,000 pounds are also excluded.

Standard vs. Itemized Deductions

You can choose to deduct driving-related work expenses.

  • The standard per-mile deduction rate includes the typical costs of fuel, insurance, depreciation, repairs, tolls, parking fees, licenses and other vehicle expenses.
  • The total cost of your actual expenses may be better for drivers who use relatively expensive vehicles for business purposes. Be sure to keep track of your mileage, as well as comprehensive records of all auto-related expenses.

Non-Eligible Expenses

Only expenses for which your employer does not reimburse you, can be deducted. Driving your car for personal use (school, job, doing errands, shopping, gym, etc.) cannot be deducted for auto insurance premiums.

Contact NY Auto Quotes

At NY Auto Quotes, our insurance experts get you the best rate possible for your car insurance.

 

No Comments Yet.

Leave a reply