Are Auto Insurance Premiums Tax Deductible?
If you are self-employed or rideshare driver, you might be wondering if your car insurance premiums are deductible. Fortunately, the answer is yes! The tax code allows you to write off the cost of your car insurance up to 25% of the total cost. In most cases, this amount is limited to actual expenses. Here’s how to maximize your deduction. It’s easy to save money on car insurance, but you must keep these tips in mind to make the most of this valuable benefit.
Tax write-offs for car insurance premiums
If you have a business and need a vehicle, you may be eligible for a tax write-off on your auto insurance premium. Tax-deductible insurance expenses generally apply to car insurance premiums for vehicles used for business purposes, which is not commuting to work. Examples of business-related use of a car include making deliveries, visiting clients, or driving to a business conference. In such cases, you may be able to deduct a portion of your insurance premium. Self-employed individuals or employees who use their vehicles for business purposes may also qualify for tax write-offs on these expenses.
Many people are surprised to learn that they can actually deduct a portion of their car insurance premiums on their income taxes. While this is great news for those who are concerned about the costs of insurance, it should be noted that not all car insurance premiums are deductible. To determine whether you’re eligible to write off your car insurance premiums, you should use a tool like Jerry, which can compare quotes from 50+ insurance companies in a matter of minutes.
Self-employed taxpayers
The most important thing to remember about self-employment tax deductions is that they must be related to the business of the taxpayer. Self-employed taxpayers can deduct up to 20% of their net business income. The self-employed tax deduction applies to businesses that are either partnerships, limited liability companies, S corporations, or sole proprietorships. Unless a business is profitable, self-employed taxpayers can only deduct business expenses directly related to the business.
The first step in deducting auto expenses is to determine the actual expenses that you incur while operating your business. For example, if you drive about 15,000 miles each year, about 7,500 miles of that are on the road. Generally, auto insurance premiums are tax-deductible as a business expense, if they are 50% or more of the total cost of operating the vehicle. However, you must file Schedule C with your Form 1040 to get this deduction.
Rideshare drivers
If you’re a rideshare driver, you’re likely wondering how you can claim your car insurance premiums on your taxes. The good news is that your expenses are deductible as business expenses. Depending on the amount you drive, it can be up to five hours one day, two hours the next, or seven hours the following day. However, to make sure that your rideshare driver insurance premiums are deductible, you must keep records for the entire year. For example, you must write down when you drive on the clock, and estimate any off-clock driving time. Read More
If you’re an Uber driver, you can claim this deduction for your car insurance premiums, as long as you use it while performing rideshare work. Generally, the premiums are tax-deductible, and the amount of rideshare time you work each month will determine the amount of deduction you’ll be able to take. You can also use your personal car insurance policy to fulfill your rideshare requirements.