Car insurance is tax-deductible as part of a list of expenses for certain individuals. Self-employed individuals can generally deduct car insurance, but there are a few other specific people for whom car insurance is tax-deductible, such as armed forces reservists or qualified artists. Your car insurance premium may be tax-deductible if you meet certain criteria. In general, you must use your vehicle for business-related reasons (other than as an employee) to deduct part of your car insurance premium as a business expense.
Self-employed people who use their car for business purposes often deduct their car insurance premiums. If your car insurance is tax-deductible, you may also be able to cancel your car insurance deductible. This cancellation is only possible if you have had to pay that deductible during that tax year and it only applies in certain circumstances. If you haven't filed a claim or paid your deductible, there's nothing to report beyond regular premium payments.
It's a good idea to contact a certified public accountant or tax professional to review IRS guidelines for business expenses and make sure you're entitled to these and other tax deductions. As a result, you'll usually need to have more deductions, such as business expenses, mortgage interest, or certain education expenses, to be eligible for itemized deductions. If you're canceling your car insurance deductible as a qualifying disaster loss, you'll need to complete Form 4684 and attach it to your tax return. If you're filing your taxes, you may wonder if you can deduct premiums from your car insurance.
It can also be a good time to review your car insurance policy and make sure you have the coverage you need. Coverages and other features vary between insurers, vary by state, and are not available in all states. Even if you only use your car to commute between work and home and nothing else, you're unlikely to be eligible for tax deductions. If you qualify to deduct car insurance expenses from your annual tax bill, then you need to keep a good record.
For part-time rideshare drivers, such as Uber or Lyft drivers, you may have purchased an insurance endorsement. However, if your vehicle is used for commercial use or you are self-employed, you may be able to deduct your car insurance and other vehicle-related expenses. It's a worthwhile question, especially since car insurance rates are rising and having some money back on your tax returns could help. If you work for yourself and use your car for your business or work, you'll likely be able to claim at least part of your auto insurance premiums as a tax deduction.
If you use a car for business purposes (other than as an employee), many of the expenses associated with that vehicle may be tax-deductible as business expenses, including your car insurance premium.