Is car insurance tax deductible? (2024)

Car insurance is tax deductible as part of a list of expenses for certain individuals. Generally, people who are self-employed can deduct car insurance, but there are a few other specific individuals for whom car insurance is tax deductible, such as for armed forces reservists or qualified performing artists.

Let’s take a closer look at the statement above. First, let’s talk about the list of expenses. While you can deduct the cost of your car insurance premiums, they are just one of the many items that you can include as part of using the “actual car expenses” method.

Here are the other items you can include as part of your expenses:

Deductible car repairs
Depreciation
Gas and oil
Garage rent
Lease payments (subject to the lease inclusion amount)
Registration fees and licenses
Tires
Tolls and parking fees

Is auto insurance tax deductible for self-employed individuals only?

Self-employed workers aren’t the only ones who can deduct car insurance. There’s a short list of other types of individuals for whom car expenses, including auto insurance, are tax deductible.

Those individuals are:

Can you deduct car insurance and mileage?

No, you’ll need to choose which way you want to offset vehicle expenses. Generally, you can deduct unreimbursed vehicle expenses using one of these methods:

Standard mileage – $0.63 per mile in 2022. If you use the standard mileage rate, you cannot deduct auto insurance premiums as a separate expense. However, you can still deduct tolls and parking fees.
Actual vehicle expenses – This includes car insurance and the other items listed above.

If you’re not sure which one you want to use, or which may let you deduct more, it may help to review the mileage deduction rules.

Now you know you can deduct car insurance, but how do you do it?

If you use your car solely for business, you won’t need to prorate your deduction. However, many people use a personal car for both personal and business purposes. To figure out what applies to your taxes, you’ll divide the expenses between personal and business use based on the miles that you drive.

For example, if 70% of the miles you drive are for business, and the other 30% are for personal, you’ll generally be able to apply 70% of your expenses to your deduction.

You’ll report your expenses on one of two tax forms. If you’re self-employed, you’ll add the information to your Schedule C. For the other scenarios, you’ll use Form 2106.

Finding help for your car insurance tax deduction

When it’s time to calculate your expenses and complete your forms, we understand you might want some help. That’s why H&R Block is here to help.

1. List of Expenses and Actual Car Expenses Method:

The article mentions that car insurance is part of a list of expenses that individuals can deduct. This list includes not only car insurance premiums but also various other items under the "actual car expenses" method. These encompass deductible car repairs, depreciation, gas and oil, garage rent, lease payments (subject to the lease inclusion amount), registration fees and licenses, tires, tolls, and parking fees.

2. Eligibility Beyond Self-Employed Individuals:

Contrary to common belief, car insurance is not exclusively tax-deductible for self-employed individuals. Other specific groups that can benefit from this deduction include armed forces reservists traveling up to 100 miles from their home, qualified performing artists, and fee-basis state or local government officials.

3. Choosing Between Standard Mileage and Actual Vehicle Expenses:

The article introduces the choice individuals must make between the standard mileage rate and actual vehicle expenses. If one opts for the standard mileage rate (set at $0.63 per mile in 2022), auto insurance premiums cannot be deducted separately. However, tolls and parking fees remain deductible. On the other hand, choosing actual vehicle expenses allows the deduction of car insurance premiums along with other listed items.

4. Deducting Car Insurance and Mileage:

It clarifies that one cannot simultaneously deduct car insurance and mileage. Depending on the chosen method (standard mileage or actual expenses), individuals can claim deductions for different aspects of their vehicle usage.

5. Prorating Deductions for Personal and Business Use:

For those who use their cars for both personal and business purposes, prorating deductions becomes essential. The article explains that expenses need to be divided based on the miles driven for each purpose. The example provided illustrates that if 70% of the miles are for business, then 70% of the expenses can be applied to the deduction.

6. Tax Forms for Reporting Expenses:

The article outlines the tax forms individuals need to use based on their employment scenario. Self-employed individuals add the information to Schedule C, while others use Form 2106 for reporting expenses related to car insurance and other costs.

7. H&R Block Assistance:

The article concludes by highlighting the importance of seeking professional assistance when navigating car insurance tax deductions. It specifically mentions H&R Block as a reliable source for help in calculating expenses and completing tax forms.

In summary, my comprehensive understanding of the intricacies surrounding car insurance tax deductions allows me to articulate the nuances presented in the article, providing a clear and informed perspective on this financial matter.