You are constantly looking for ways to save money on your auto insurance premium. One way that you can accomplish this is through a possible tax deduction. Here is a look at how auto insurance may be tax-deductible. If you use your vehicle for commercial purposes, then all of the necessary expenses are tax-deductible. You may be able to deduct the premiums from your taxes even if you are a self-employed contractor.
However, remember that you cannot automatically write off a car that you use to commute to work every day. You are also not allowed to write off your auto insurance if your employer has already reimbursed you. Here’s a look into how your insurance is eligible for a tax deduction.
If you use your vehicle for both personal and professional endeavors, you can deduct your costs from taxes during commercial use. However, this doesn’t include commuting to your place of work. Even if you do not regularly use your vehicle for commercial endeavors, you may still qualify for the tax break if your job requires you to drive to a special event. If you drive for a rideshare company, you may need to purchase special insurance to cover you while you work, and the insurance is deductible.
If you are mandated by state law to obtain rideshare insurance, you can deduct the premium from your taxes. Divide your monthly premium by the amount of time you are driving for the ridesharing app. If you are renting property, any expenses associated with traveling there are covered. Any trips you make to take care of the property are eligible for a write-off.
You are not allowed to deduct losses that occurred due to theft or a personal casualty. The rare exception is if the loss occurred in a mandated disaster zone. If your car suffers a financial loss due to a disaster, you can write it off minus any amount that you are compensated for. Your car has to be damaged in a way that your insurance won’t cover you to qualify for the write-off.
You’ll file a Schedule C tax form with your deductible insurance expenses listed if you are self-dependent or are a rideshare driver. However, if you receive a W-2 from your employer, you can file Form 2106. You may need to add other deductions to be eligible for itemized deductions.
Keep accurate and proper records for tax filing. This helps you keep track of the amount of rideshare driving you are doing during the year. Try to write down an accurate estimate of the times when you’re not working. Hold on to your records for a few years so that you’ll have a reference point if the IRS contacts you. Contact your accountant if you have a question. You want to avoid a possible audit.
There are multiple ways to save money on your auto insurance through tax write-offs. Review your insurance policy carefully, especially if you use your vehicle for commercial purposes. If you have any questions, contact our team of insurance experts at Gee-Schussler Insurance Agency.
