Ensuring your taxes are filed as accurately as possible is the best way to receive a large refund check in the mail. If you’re looking to save a nice buck this tax season, you might be wondering: Is auto insurance tax deductible?
For most people, the answer is, unfortunately, no. But if you use your vehicle for business-related purposes, or hold an occupation that qualifies, then you may be able to deduct a certain amount of your auto insurance premium from your taxes.
Vehicles for Business
The number one reason someone is able to deduct their auto insurance is if they use the vehicle for business purposes. This most often describes self-employed people and business owners.
If this is you, there are other additional vehicle related expenses you can write off your taxes, such as:
- Repairs and maintenance
- Gas and oil
- Garage rent
- Lease payments
- Registration fees and licenses
- Tolls and parking fees
- Value depreciation
Deducting these business-related costs is known as the Actual Expenses method. Alternatively, you can use the Standard Mileage method, which deducts an amount based on the number of business-related miles driven, using a cents-per-mile rate.
You cannot deduct both your expenses and your mileage, so it’s a good idea to do the math and figure out which method will bring you the largest refund.
Vehicles for Personal Use
If you use your vehicle strictly for personal use, you probably do not qualify for this benefit. Keep in mind that driving your car to and from work does not count as business purposes, as the IRS deems the vehicle non-vital for the performance of your job.
If you use your vehicle for personal and business uses, you need to quantify the amount of time that is applicable. For example, if you mostly use your car for personal reasons but spend about 20% of your time behind the wheel as a rideshare driver, you will be able to deduct 20% of your auto insurance premium.
Who Else Qualifies for Tax-Deductible Auto Insurance?
Besides self-employed people, there are few others who qualify for auto insurance deduction. This includes armed forces reservists who are traveling up to 100 miles away from their home, qualified performing artists, and fee-based state or local government officials.
Finally, employees who use their vehicle for the operation of the business, who are not already being reimbursed by the company, will also qualify. For example, consider someone who works at a restaurant and is expected to help pick up ingredients and supplies. As long as their boss is not already compensating them, they will be able to deduct a small percentage from their taxes.
Tips for Deducting Your Auto Insurance from Your Taxes
If you are planning on deducting your auto insurance or other expenses, here are some tips to help the process go as smoothly as possible.
- Keep any and all records: Keep any receipts which prove the amount of money you have spent on the vehicle. This paperwork will make filing for a refund much easier.
- Track your mileage: Use an app to track the amount of miles you are driving for your business. Be sure to exclude personal usage miles.
- Talk to the professionals: If you are unsure if you qualify for a tax deduction, or you are curious which method of deduction would be most beneficial to you, contact a professional accountant and tax expert for advice.
Premium Auto Insurance in MD & WV
The world of auto insurance coverage can be a tricky one to navigate, but it doesn’t have to be. When you work with the experts at Antietam Insurance, personal coverage can be a breeze! We offer the most convenient and flexible coverage throughout Maryland and West Virginia, backed by our friendly and knowledgeable service.