Auto Insurance Tax Deductions
Auto insurance is meant to provide coverage while you are on the road. However, many people do not know that it can also help when it tax season comes around. Specific insurance related costs can be deducted when you file your taxes.
If you use your vehicle just for personal purposes, you cannot deduct your auto insurance premiums from your tax return. However, if you use your car for business purposes, no matter if you are an employee or self-employed, you may be able to deduct certain auto insurance expenses. If you are already getting fully reimbursed for your expenses at work, you will not be able to deduct them from your taxes.
There are two ways that you can calculate auto expense deductions, including:
- Actual expense method – in which you deduct the actual cost of using your car for business. These expenses can include tolls, depreciation, insurance premiums, parking fees, gas and oil, repairs, rental fees, excise tax, lease fees, and garage rental fees.
- Standard mileage allowance – the standard mileage rate is around 50 cents for every mile that you drive for business purposes. Keep in mind that there are several requirements that you have to meet before your can start deducting miles. You may also be able to deduct the cost of certain business-related parking and tolls, but not commuting related parking and tolls.
No matter what method you use to calculate your expenses, you are required to keep careful records for the IRS, including the number of miles that you drove, the dates that you used your vehicle, and the reason for the travel.
No matter if you use your vehicle for business or strictly personal use, it is important to make sure that you have the right auto insurance coverage. Contact Phocus Companies in Phoenix, Arizona for all of your car insurance needs.
