The answer to the question, is car insurance tax deductible, isn’t just a straight forward yes or no. It depends on your situation, as a self-employed individual may be able to deduct car insurance, while a non-business owner may not. Here’s a look at a few of the scenarios and whether or not car insurance will be tax deductible in each scenario.
W-2 Employees and Salaried Employees
If you work full time as a salaried employee or W-2 employee, you may be able to deduct some of your car insurance. Maybe you use your vehicle to run errands for your employer or you commute from a long distance to work. If your employer doesn’t reimburse you for your car expenses, you may be able to deduct 15% of your insurance premiums.
However, if you’re a W-2 or salaried employee and you don’t run errands or use your vehicle for work, you won’t be able to deduct your premiums.
Business Owners
As a business owner, you may be able to deduct a portion of your car insurance premiums on your taxes. If you’re a sole proprietor and at least 60% of the miles you drive are for business purposes, you can deduct a portion of your auto insurance premium. The portion you can deduct will depend on how much you use the vehicle for business purposes compared to personal purposes.
Freelancer or Contract Worker
As a freelance worker, if you use your vehicle to travel to and from clients homes or to meet in public with clients, you may be able to deduct a portion of your auto insurance premiums. Usually, you can deduct the percentage of your premium based on how much you use the vehicle for business. For example, if you drive to and from client’s homes half the time, you can deduct 50% of your insurance premiums.
Types of Deductions
As a business owner, freelancer or contract worker, you will have options when it comes to your deductions. You can use a standard deduction or an itemized deduction for all driving-related expenses including car insurance.
By Premraj
See full story at blog.budgetpulse.com
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