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Tax deductions are a way to lower your taxable income, so you can decrease the amount of taxes that you owe the government. Thinking about the different IRS-approved deductions as you prepare your tax returns may lead you to wonder: Is auto insurance tax deductible? The answer depends on how you use the car and other factors.
For specific questions about your own taxes, consult a tax professional for trusted advice. For general information, keep reading.
Generally, you can calculate business vehicle expenses one of two ways: the standard mileage rate or the actual expense method. Depending on your situation, you might qualify for one or both methods. If you qualify for both – and you don’t mind crunching the numbers – it might be worth it to calculate both ways to see which method gets you the bigger deduction.
Of course, it’s possible your car expenses (including auto insurance) might not be tax deductible at all. Here’s what to expect in a few common situations:
For more information on business use of your car, read this tax topics guide on the IRS website.
Using your car only for personal reasons like running errands or going shopping, it is not a write-off on your tax returns. But if your car was stolen or totaled after an accident that wasn’t your fault and the damage exceeds the limits in your insurance policy, you may be able to claim the loss as a tax deduction. Limitations may apply based on the damage costs and your income.
It’s a good idea to get in touch with a certified public accountant or tax professional to review the IRS guidelines for business expenses and make sure that you are entitled to these and other tax deductions. The latest tax guidance can be found at IRS.gov.
It can also be a good time to review your auto insurance policy to be sure that you have the coverages that you need. Contact your local independent insurance agent for more information about insurance coverage.