Is Car Insurance Tax Deductible?

Updated October, 2020
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Your car insurance is tax-deductible if you use your car for work-related reasons. This includes self-employed business owners, freelancers, and employees who regularly make work-related trips. However, you can't get a tax deduction if you're only using your car for personal reasons.

What is an auto insurance tax-deductible?

Tax deductions are expenses that are subtracted from your yearly taxable income.

Applying for a tax deduction for your auto insurance premiums is tricky because you only qualify if you're using your car for work-related reasons.

This doesn't include your daily work commute or personal uses. It refers directly to trips made on behalf of a business.

What if I'm self-employed or a freelancer?

If you use your car regularly for your own business-related reasons, you get a tax deduction. This includes trips made to do the following:

  • Buy supplies
  • Conduct meetings
  • Make orders
  • Meet clients

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What if I'm frequently making work-related trips?

If you're a W-2 employee you receive a tax deduction for work-related trips done with your personal vehicle if your employer doesn't reimburse your insurance.

This tax deduction can't be made if you only use your car for your work commute. It's purely for business-related trips, such as the following:

  • Attending a group meeting
  • Meeting a client
  • Picking up order supplies
  • Visiting another branch
  • Running general errands

What if I use my car for both work and personal reasons?

You still qualify for a tax deduction if you're using your car to make both work-related trips and personal trips. In this case, your deduction is based on the percentage of time you use your vehicle for work-related travel.

For example, deduct 50% off your auto insurance premium if you use your car for work-related travel for 6 months of the year. If you make occasional work-related trips, then only deduct for those trips.

These types of trips include the following:

  • Business trips
  • Conferences and functions

How to get your car insurance tax deduction

  1. Log your mileage. Be very precise.
  2. Keep your driving records to prove the validity of your trips
  3. Speak to a tax professional if there are other deductions you qualify for (vehicle expenses and speeding tickets).
  4. File for your tax-deduction

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