Today, we want to focus on your car insurance and a possible tax deduction. Auto insurance might be deductible, if you drive your car or truck for business purposes.
Generally a tax deduction is available for self-employed people who drive for business, or employees who use their own vehicle as a part of their job. Your daily commute to work is not tax-deductible.
If you use the vehicle for business purposes, the insurance premium you pay qualifies for a tax deduction. Apart from taking a tax deduction for insurance premiums, you could also calculate the cost of using your car for business purposes and deduct this cost when filing your returns. However, you need to go about it in the right manner and must keep in mind the tips mentioned below.
- You can take a tax deduction in two ways. You could either calculate the actual expenses incurred for using your car for business purposes or you could select the standard deduction rate put forth by the IRS.
- If you choose to calculate the actual expenses incurred, you will have to maintain records and receipts to prove that you have made a valid tax deduction. Expenses on licenses, registration fees, gas, and oil, parking fees, tolls and car insurance can be deducted if the vehicle is used for business purposes. Moreover, you could also calculate vehicle’s depreciation and add it to your deductible amount when filing your returns.
- As a general guideline, if you’re self employed, you could deduct a certain percentage of the interest you’re paying on your auto loan, if you use the vehicle (even partially) for business purposes. However, this deduction does not hold well if you’re an employee of any given organization.
- As an employee you may be eligible for tax deductions if you have used your personal vehicle for business, on an occasional basis. However, you do have to provide sufficient proof to support your deductions.
- In any case you should check with your tax professional in order to take the correct steps on your taxes.
Check with your Insurance Broker about your auto insurance requirements.