When it comes to taking deductions on your tax bill, don’t overlook your auto insurance premiums, deductibles and payments. If you use your car for your job, you may be able to deduct some of your auto insurance expenses. Here are some general tips on finding out if you are eligible, but be sure to talk to a tax accountant to make sure you’ve got it right.
The Personal/Business Use Test
The first step is to determine if you qualify as using your car for business. You may qualify if you use your car to:
- Attend client visits
- Drive to business conferences or other meetings
- Deliver or pick up business supplies
If you just use your car to commute to and from your place of business, you do not qualify.
If your car is driven for both personal and business use, you must divide your expenses based on actual mileage for each use.
An Exception to the Rule
If you do not use your car for business, there is still hope for getting that tax bill down. If your car was totaled or stolen, and whether you used the vehicle for personal use or for business, you might be able to claim a loss deduction. Of course, there are some rules you must have followed to claim this loss deduction.
First, you must not have been found negligent regarding the incident and you must have filed an insurance claim for it. If your auto insurance company did not reimburse you 100% for the loss, and the damage or loss is more than your policy limit, you can probably deduct the difference. You might even be able to deduct your deductible!
The one catch is that your expenses for the incident must be over $100 and more than 10% of your AGI. So, if your AGI is $20,000, the incident must have cost you at least $2,001.
Potential Tax Deductions
So, if you pass the test and use your car for unreimbursed business expenses, what exactly can you deduct?
There are a couple of ways to look at this.
First, you can use the standard mileage rate. For 2017, the rate is 53.5 cents per mile. This is a good option if you do a lot of driving for work that your employer does not reimburse you for. Use this method if your car is used sometimes for personal use and sometimes for business use. If you use this method, be sure you keep good records of actual mileage driven for work.
Another method is to deduct your actual vehicle expenses. Again, record keeping is very important here. You should always check with a tax account, but according to the IRS, if you use your car for business, you can deduct costs related to your car, including maintenance, repairs and your insurance premium.
Record Keeping
If you are going to deduct car insurance expenses, it’s important to keep good records for the IRS. A good rule is, if you don’t have documentation for an expense, don’t take the deduction.
And when you’re ready to find some savings with your auto insurance premiums, check out the InsuranceWins easy-to-use form. You might be surprised at how much you can save.
