Is Car Insurance Tax Deductible?

• Tweet

• Tweet

A common question folks ask is if “car insurance is tax deductible?”  The answer is simple; yes and no.

Of course, it really depends on the type of car insurance you’re referring to.  When it comes to personal auto insurance, the answer is a resounding NO!

Unfortunately, we cannot take tax deductions for insurance premiums paid on our personal car insurance.

In general, if you do not pay taxes when purchasing or acquiring something, car insurance in this instance, there is likely nothing in the tax code that allows for deductions on the expense.

What About Business Use?

You may be able to deduct auto insurance premiums if you are self-employed and use your vehicle for business purposes. To be clear, you will not qualify for a tax deduction for your daily drive to work…you must use the vehicle as part of your business.

For example, you may be a traveling salesperson who does not have an office location to work from. On the other hand, you don’t qualify for a tax deduction if you are an accountant who drives five miles back and forth to your office each day.

Be sure not to count your regular commute when calculating your total expense for business use in a given year. It’s not an “all or nothing” deduction. If your mileage is split 50/50 for commute and “business travel,” you can only deduct 50% of your mileage.

Basically, you have two options:

If you do qualify to deduct your insurance premium expenses from your tax bill based on the information above, you’ll need to decide which of the two options the IRS allows is best for you.

The first option is to deduct actual expenses which include: oil, gas, tolls, depreciation, garage and parking fees, repairs, licenses and even tires.  If you choose this option, you’re able to deduct your car insurance premium as well as an actual expense.

The second option is to deduct the standard rate, which is simply a dollar amount based on the mileage you rack up for work.  The second option is probably the most common, as it is the easiest to keep track of. For example, the IRS allows $.51 per mile as the standard deduction for 2011. You are able to deduct $2,550 from your taxable income if you racked up 5,000 miles of “qualifying” business travel in 2011. The second option (standard mileage deduction) is probably the most common method, as it requires much less effort from a tracking standpoint.

Normally, this is where I would tell you to contact your independent insurance agent or direct insurer if you have additional questions on whether car insurance is tax deductible in your particular situation.

However, this time I am going to refer you to the taxman, or the IRS.  While the odds are your agent can help you, they will most likely decline to do so as they are not licensed to offer tax advice and therefore not “insured” to give it.

Compare Top Insurance Providers:

Auto Insurance Quotes State: Choose State... Alaska Alabama Arkansas Arizona California Colorado Connecticut Washington D.C. Delaware Florida Georgia Hawaii Iowa Idaho Illinois Indiana Kansas Kentucky Louisiana Massachusetts Maryland Maine Michigan Minnesota Missouri Mississippi Montana North Carolina North Dakota Nebraska New Hampshire New Jersey New Mexico Nevada New York Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Virginia Vermont Washington Wisconsin West Virginia Wyoming Life Insurance Quotes State: Choose State... Alaska Alabama Arkansas Arizona California Colorado Connecticut Washington D.C. Delaware Florida Georgia Hawaii Iowa Idaho Illinois Indiana Kansas Kentucky Louisiana Massachusetts Maryland Maine Michigan Minnesota Missouri Mississippi Montana North Carolina North Dakota Nebraska New Hampshire New Jersey New Mexico Nevada New York Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Virginia Vermont Washington Wisconsin West Virginia Wyoming

Homeowners Quotes State: Choose State... Alaska Alabama Arkansas Arizona California Colorado Connecticut Washington D.C. Delaware Florida Georgia Hawaii Iowa Idaho Illinois Indiana Kansas Kentucky Louisiana Massachusetts Maryland Maine Michigan Minnesota Missouri Mississippi Montana North Carolina North Dakota Nebraska New Hampshire New Jersey New Mexico Nevada New York Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Virginia Vermont Washington Wisconsin West Virginia Wyoming Health Insurance Quotes State: Choose State... Alaska Alabama Arkansas Arizona California Colorado Connecticut Washington D.C. Delaware Florida Georgia Hawaii Iowa Idaho Illinois Indiana Kansas Kentucky Louisiana Massachusetts Maryland Maine Michigan Minnesota Missouri Mississippi Montana North Carolina North Dakota Nebraska New Hampshire New Jersey New Mexico Nevada New York Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Virginia Vermont Washington Wisconsin West Virginia Wyoming

Related Topics:

1. Is Homeowners Insurance Tax Deductible?
2. Is Health Insurance Tax Deductible?
3. Is Life Insurance Tax Deductible?
4. What is a First Dollar Deductible?