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Is car insurance tax deductible?

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If you’re filing your taxes, you might find yourself wondering if you can deduct your car insurance premiums. It’s a worthy question, especially because car insurance rates are increasing and getting some money back on your tax returns could help. However, car insurance can only be claimed as a tax deduction in specific circumstances. If you use your vehicle solely for personal reasons, it’s unlikely that your car insurance will be tax-deductible.

If your vehicle is used for business use or you are self-employed, though, you might be able to deduct your car insurance and other vehicle-related expenses. Bankrate can provide some high-level guidance on what qualifies for these tax deductions and how to go about filing them. However, taxes can be complex and each person’s situation is unique. You may want to speak with a tax professional about your specific needs to ensure you are filing properly.

Is my auto insurance tax-deductible?

During tax season, you may find yourself wondering, “Can I write off car insurance?” You might be able to, but only if you fit into a few specific driver profiles. Business owners and self-employed taxpayers may be able to claim their car insurance as a tax deduction. For these people, car insurance may be considered a business expense and may be tax-deductible.

Business owners and self-employed people may be able to deduct their car insurance on their tax returns, but what about drivers who use their vehicles solely for personal purposes? Unfortunately, for this group of taxpayers, car insurance is not tax-deductible.

How to deduct your car insurance when filing taxes

When filing taxes, you may be able to add some or all of the cost of your auto insurance into your business expenses. For self-employed individuals and rideshare drivers (such as Uber and Lyft), you will need to fill out a particular form that includes reporting for auto insurance expenses. This form is called the Schedule C form and can be found on the IRS website. Otherwise, if you work for an employer but still use your own vehicle for business, you can fill out a Form 2106, allowing you to report business expenses. These forms allow for reporting of auto insurance premiums and deductibles as a business expense.

Keep in mind that day-to-day commutes to and from work generally do not qualify as business use. Even if you only use your car to commute between work and home and nothing else, it is unlikely to be eligible for tax deductions. In general, only driving done during your business hours and for business purposes is eligible.

Writing off your car insurance deductible

If your car insurance is tax-deductible, you may be able to write your car insurance deductible off as well. This write-off is only possible if you have had to pay that deductible during that tax year and only applies under certain circumstances. If you have not filed a claim or paid your deductible, there is nothing to report beyond the regular premium payments.

All tax filers need to remember the standard deductible when filing taxes. If your write-offs do not add up to more than the standard deductible, then they will not save you money on taxes. The reason is that the standard deductible is an ‘either/or’ mechanism. You either use it or your own tallied deductions. If your totaled deductions exceed the standard deductible, you can replace the standard deductible with your calculated deductions.

What if my car is used for both business and pleasure?

If you use your vehicle for business purposes only, you may have an easier time filing your taxes since you won’t have to figure out the split between your business and personal use. Using your car for both business and pleasure use can make things a bit trickier. If your car is used for both business and personal purposes, you’ll need to use the standard mileage rate to calculate how much you can write off. The standard mileage rate is the cost-per-mile measurement approved by the IRS for various business uses. It gives approved cents-per-mile expenses for different uses of vehicles, like driving for business or medical purposes. The standard mileage may be updated each year, so make sure to check the current rates before filing.

For part-time rideshare drivers, such as drivers for Uber or Lyft, you may have purchased an insurance endorsement. Rideshare endorsements generally give you coverage while your app is on and you are looking for a passenger, but remove coverage once someone gets in your car; at that point, Uber or Lyft take over responsibility. In those cases, the rideshare insurance add-on may be considered a business expense, and the associated cost could be tax-deductible.

Frequently asked questions

What company has the best car insurance?

The best car insurance company will vary based on your unique needs and circumstances. For example, one driver might be looking for a company that offers a certain specialty coverage while another driver might be looking for the cheapest rate. Understanding your needs is the first step to finding car insurance that fits your situation, and shopping around to compare companies can be a helpful strategy.

How much car insurance do I need?

How much car insurance coverage you need will depend on your risk tolerance, the assets you have to protect, your budget and your overall financial picture. Additionally, most states have required minimum limits that you must meet or exceed to drive legally. Buying minimum limits will often result in a lower premium, but most insurance professionals recommend that you buy higher limits to better protect your finances.

How much does car insurance cost?

The average cost of car insurance in the U.S. is $1,771 per year for full coverage. However, your premium will vary based on a number of car insurance rating factors including the state you live in, your driving history, the type of car you drive, and the coverage types and levels you choose. The best way to know how much you’ll pay is to shop around and compare car insurance quotes.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor