Your car insurance can be written off at tax time if you fit into qualifying circumstances. Basically, you can deduct your car insurance premium if you use your car for business purposes. You may be able to write off the cost of your insurance deductible, too, if you live in a federally mandated disaster area and your car damages or loss are related to a natural disaster.
Deducting Your Auto Insurance Premiums
When you use your car for business purposes, the premium you pay is tax-deductible as a business expense.
But keep in mind that:
- Commuting to and from a job doesn’t qualify as a business expense.
- If your business or employer already reimburses you for driving your own car for business purposes, you can’t claim a tax deduction.
If you use your car for both business and personal reasons, you can deduct car insurance premiums only for the percentage of time devoted solely to business. But, if your employer reimburses you, you cannot claim a tax deduction.
Rideshare companies – As a driver for a rideshare company, like Uber and Lyft, you may be required to buy special rideshare insurance coverage to protect yourself and your passengers for the time you are actively driving for the rideshare company. This is deductible. Some states require you to have rideshare insurance and, even if it just goes into effect while driving, you can deduct the whole premium at tax time.
Your personal car insurance generally won’t cover your vehicle while you’re driving for the rideshare, but if your state and the insurance company let you use personal insurance while ridesharing, you can deduct a portion of your premium costs based on the percentage of time you act as a rideshare driver.
Airbnb and rental homeowners – If you rent out an Airbnb or vacation home regularly, you can deduct any travel expenses resulting from maintaining the property. This includes traveling for cleaning, upkeep and even to let guests into the home.
Writing Off Your Auto Insurance Deductible
You can write off your auto insurance deductible if you meet both of these qualifications:
- You live in a federally mandated disaster area
- Your vehicle is damaged due to a disaster such as a hurricane or disaster-designated wildfire.
If, however, you receive any loss for which you are reimbursed by insurance, you cannot deduct the losses from taxes.
You are required to subtract $500 from the cost of your loss before determining what amount you can deduct from your taxes. If you have opted for comprehensive coverage and you’re a deductible of $1,500, for example, and your car was worth $20,000 before it was destroyed by a disaster, your insurance would compensate you with $18,500. You would then subtract $500 from your $1,500 deductible and be able to write off the remaining $1,000 of your deductible.
If you don’t have comprehensive coverage and your car can’t be salvaged, you can write off the value of the car less $500.
Consult with a Pro
Always read through your car insurance policy to understand what is covered. If you have a personal accountant or use tax preparation software that offers a helpline, check with the professionals regarding the tax laws that apply specifically to your situation.