By Vicki Stahlman, CIC
In 2019, Americans are mobile. Not long ago, a trip from Clearfield to Clarion or even a trip from Brookville to DuBois would have been a day-long undertaking for the early residents of our region. Today, we enjoy our mobility – for work and for pleasure. We also like saving money when it is possible.
Is auto insurance tax deductible like other business expenses?
“For specific questions about your taxes, I recommend that you consult with a trusted tax professional,” says Vicki Stahlman, certified insurance counselor at Sarvey Insurance.
“Generally, you can calculate business vehicle expenses two ways – the standard mileage rate or the actual expense method.”
So, the answer to the question depends upon how you use your vehicle and other factors.
Under the standard mileage rate, auto insurance is not itemized as its own expense; however, it is rolled into the government calculated rate (54.5 cents per mile in 2018 or 56 cents per mile in 2019).
If you employ the actual expense method, separate costs of operating your vehicle are listed such as fuel, oil, repairs, tires and insurance; once listed, you deduct the percentage of those costs that can be attributed to miles driven for business purposes.
Many people use their personal vehicle for work, as more and more people work remotely. Depending upon your situation, you might qualify for one or both of the methods Stahlman mentions.
It might be worth your time to calculate both ways to see which method provides you with the biggest deduction.
“It’s possible that your vehicle expenses, including auto insurance, may not be tax deductible at all,” says Stahlman.
According to the IRS, businesses that own and that are dependent upon the use of company cars or a fleet of vehicles may deduct auto insurance as a business expense if it is for your trade, business or profession.
Stahlman adds, “If you’re self-employed and use your vehicle exclusively for business, you may be able to deduct certain car expenses, including your insurance premium.”
Individuals may also qualify for this deduction if they are an employee and their employer does not reimburse them for business-related vehicle expenses – subject to certain limitations by the IRS.
If you use your personal vehicle for both business and personal reasons, only the portion used for business reasons is tax deductible.
Stahlman adds, “You can’t claim your commute to and from work, but there are deductions available for work-related driving duties like visiting clients or picking up work supplies – keep track of these type of activities and discuss them with your tax professional.”
Ultimately, if you have questions about the viability of using your auto insurance as a tax deduction, you must consult with a certified public accountant or tax professional.
“I have spent over thirty years working with individuals and businesses;” Stahlman states, “when it comes to auto insurance, the more questions that you ask, the better prepared and protected you will be.”