Is Auto Insurance Tax Deductible?


April 15, each day several Americans dread, sneaks au courant U.S. quicker than we’d like. The day we tend to flip over an oversized portion of our hard-earned money to fictitious character isn’t each day that several folks forestall to. If anybody tells you they fancy paying taxes, they’re lying through their teeth. fortuitously, for several folks, our accountants will play with the numbers, work their magic, and lower our taxes by a small margin. They do so by deducting expenses: which brings us to the topic of this article – are the auto insurance premiums that you pay every month tax deducible?
They say there are three guarantees in life – birth, death, and taxes. If you live in the United States and drive a car, you can add a forth to the mix: auto insurance expenses. Here in the US, the government forces all cars on the road to have a valid auto insurance policy before they are driven. While it’s definitely a smart idea to have auto insurance, the monthly cost of it can definitely put a large hole into your savings. If you are hoping that paying through the nose for insurance doesn’t go without merit and that you can deduct this expense when you file your taxes, you might be in luck. In certain situations, you can deduct your car insurance costs from your taxes.
When You Can Deduct
If you find yourself in the following circumstances, you may be able to deduct your auto insurance costs from your taxes. Keep in mind, however, that before you take our word on anything, you should first consult your accountant.
If you drive your car for business, you are most likely eligible for a tax deduction. This deduction is available if you are self-employed and use for car for business purposes. To take advantage of this tax break, list your yearly auto insurance premiums as an expense on Form 2016 under Employee Business Expenses. Of course, you first need to calculate the deduction rate from the IRS, and if you are unsure of how you should do this, you should consult your accountant first.
To get an idea of how these deductions would work for a self-employed individual, consider these two examples:
• You are a plumber. 70% of the miles you drive are spending driving to and from your clients’ homes or to Home Depot to pick up supplies. The other 30% of the miles are for your personal use. during this state of affairs, 70% of your auto insurance premiums would be tax deductible.
• You are a wedding photographer and drive 20,000 miles per year. 10,000 miles are for personal use and 10,000 miles are spent driving to the weddings you are photographing. In this situation, five hundredth of your insurance premiums square measure tax deductible.
If you’re associate worker and your leader needs you to drive for business reasons, you’re conjointly qualified to deduct your automobile insurance rates. However, if you worker reimburses you for your motorcar premium prices, that they usually do, then you can’t claim these as a “business expenses” on your tax forms. To insure what you’re allowed to assert, raise your leader as he or she presumably includes a solid understanding of things.
If you simply drive your automotive for private reasons, like driving to high school, driving to your job, doing errands, going searching, driving to the gymnasium, etc. you can’t deduct your motorcar insurance premiums. though you will think about using your vehicle to drive to figure as a “business expense,” the US Government doesn’t. although you drive your vehicle as a neighborhood of your daily commute to and from work, the federal agency still views that as personal-use.
If you employ your automotive for each personal and business reasons, you’ll be able to deduct the portion of the insurance expenses that square measure used for the business. If you’re getting to build deductions exploitation this technique, it’s important to stay careful records of your business travel, together with once you used the automotive, for the way several miles you drove the automotive, and therefore the specific reason for driving the automotive.
We square measure all desperate to save cash, however writing things off on your taxes is serious business and needs caution. like all recommendation given during this column, don’t take solely take our word for it. like all tax and legal recommendation, you ought to perpetually discuss with associate professional or associate comptroller. to seek out associate authorised tax account in your space, visit the Amercan Institute of CPA’s web site.