Car insurance is a necessary expense, and it might be one that you’re hoping to write off from your taxes. But whether car insurance is tax deductible will depend on your career and how you’re using your vehicle.
Car insurance is usually tax deductible when you’re using your vehicle for business purposes, such as if you’re self-employed. Business owners can write off their car insurance as a business expense, or they have the option of tracking mileage and using the standard mileage rate to deduct their mileage from their taxes.
Your car insurance isn’t tax deductible if you’re an employee. That means that your commute to and from work, the errands you run for your boss, and your drive to a conference don’t qualify as tax-deductible expenses when you’re driving your own car. Instead, your employer might agree to reimburse you for mileage when you use your personal car to run errands or drive to a conference.
In contrast, if you drive for a service like Uber or Lyft, you may need to purchase an insurance endorsement that offers specific coverage when you’re using your vehicle for rideshare services. You may be able to write off the insurance endorsement as a business expense.
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Generally, personal car insurance is tax deductible if you’re self-employed and use your car for business purposes. If you use your car solely for business, you may be able to write off your car insurance premiums.
Things get trickier if your vehicle is for both business and personal use. Instead of writing off your full car insurance premium, you’ll need to track the mileage that you drive while using the car for business purposes. When you file your taxes, you’ll calculate your total deduction using the total business miles driven during the year and the standard mileage rate.
While you’ll usually need to be self-employed to deduct your car insurance premiums, there are a few situations where car insurance may be a tax write off for individuals who aren’t self-employed. Armed forces reservists who travel up to 100 miles from their home may be able to write off their car insurance premiums. State and local government officials may also be able to write off their car insurance
Being able to deduct your car insurance can take some of the sting out of those large insurance payments, since you’ll save a little money on your taxes. But high car insurance rates can eat into your profits if you’re running a business. And if you’re not able to write off your car insurance, those rates hurt even more.
Shopping around and comparing quotes can help you find the best deal on your car insurance. Whether your vehicle is for personal or business use, you may be able to save by changing to a different insurance company. You can get free car insurance quotes online to start comparing your options today.
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Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.
