There are two major payments that you may make in the course of a year in regards to your car insurance policy. The first is your car insurance premium, which is the money you pay monthly (quarterly, or annually) for your insurance coverage. The second is any deductible you need to pay before your benefits kick in, such as having to pay the first $1,000 of any auto damage. Are either of these payments tax deductible when tax time rolls around? Both of these items can be written of your taxes, but only under certain circumstances.
Tax-Deductible Auto Insurance Premiums
The short answer is that if your car is used primarily for business purposes, then the expenses associated with operating the vehicle are probably tax-deductible. These expenses may include all your gas, maintenance and yes – your insurance premium. If you do not use your vehicle for anything other than work, you should be allowed to write off 100% of your premium. If your car is used for both business and personal reasons, you can deduct the percentage of your premium which coincides with usage.
For instance, if you use your vehicle half of the time for business use, you are allowed by law to write off 50% of your premium. However, an individual is not allowed to write off a car insurance premium if your car is simply used for commuting to and from work – even if you commute a long distance. Also, you are not allowed to claim money spent your insurance premium as deductible if your company already reimburse you for the cost. For instance, many sales people use their cars to get to and from appointments, but their employers pay them for mileage or gas. If this is the case, the premium is not deductible.
Deductible Car Insurance – Alternate Situations
There are many different situations which may allow you to deduct a portion of your car insurance premium. If you are a landlord and must travel back and forth to properties for upkeep, maintenance, or check-in procedures, you can write off the premium allotted to those trips. A single trip may only amount to a tiny percentage of the annual premium, but if you routinely make these trips they can add up quickly.
A more contemporary situation where this has become relevant is with Uber and Lyft drivers. The amount of time that the vehicle is used for taxi or rideshare services is deductible. In many states, special insurance is required to transport others officially, and in these cases the entire additional premium is deductible.
Car Insurance Deductibles as Write-Offs
Beginning last year (2018 taxes), you are typically not allowed to write off car insurance deductible payments unless the damage to your car occurred within a federally-mandated disaster area. One example in the Sarasota and Bradenton area was Hurricane Irma. If your car sustained damage du to the storm and you had to pay a deductible to have it fixed, you were able to deduct that payment from your tax return. You are not allowed to claim money which was reimbursed to you by your insurance company.
If you have any questions regarding car insurance and tax deductions, you should always check with a tax professional to make sure you are within the law. You should keep detailed tax records in the form of receipts, as well as a log if you use your car partially for business to keep track of time. If you have additional questions regarding car insurance coverage for business use, be sure to call the professionals at Anderson & Associates Insurance Group. We are here to help.
