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Is Car Insurance Tax-Deductible? The Basics Explained

car insurance tax deductible

Tax time brings with it forosophobia (fear of taxes), deductions, and getting it wrong.

Something unfortunate, for all of us, is the task of finding out if car insurance is tax-deductible. The answer is “yes”, “no”, and “it’s increasingly probable”.

The world of tax deductions in a confusing, convoluted one that’s also ever-changing. These often confusing changes might only last a few years before yet another set come in, or expire.

Want to know a little tax advice on car insurance tax deductibles? Keep reading to find out all you need to know about car insurance tax deductions and saving on taxes.

Is Car Insurance Tax-Deductible?

Many of the complications come from the Tax Cuts and Jobs Act (TCJA) that’s active from tax years 2018 through 2025. After 2025’s tax year, it’s likely that the Act will expire. Since there are three answers to the question of deducting car insurance from tax, we’ll cover them one at a time.

Yes, tax deductions on your car insurance are possible to obtain, if you’re:

  • One of the few exceptions to the rule
  • An unreimbursed employee using your personal vehicle for business use
  • Vehicle sustained damage or destruction because of disaster
  • Self-employed

You can deduct casualty and theft losses to vehicles on your federal income tax return due to disaster. However, it needs to be declared an official disaster by the sitting President.

Business use under “unreimbursed employee expense deduction” still exists for self-employed individuals on their Form 1040. It’s handy to check the standard mileage rates for the current year when doing your calculations. You can itemize standard consumables and repairs, as well as depreciation, loan interest, and insurance.

This Is Where It Gets Complicated

Employed by a company, but use your own vehicle? Use Form 2106 (Employee Business Expenses) to file all expenses important for the business. But only do this if you aren’t compensated directly by the business already.

This is one of those cases where it’s normally a “no,” since businesses most often reimburse employees for their personal vehicle use.

Therefore, you can only claim, as an employee, if you’re using your personal vehicle for business purposes. This means you need a business-use policy or commercial auto insurance. You’ll need to talk to your insurance agent to find each insurance company’s definition of what business use is, though.

The miles you can count start from leaving the parking spot for business reasons, without counting any personal side trips along the way. Commuting from home to work is considered a personal expense as well if you’re going to an office job.

Since more people are remote workers, on a hybrid schedule, or are self-employed, the situation for claiming deductions is growing.

Get Answers — ASAP

Learning about car insurance tax-deductible from us isn’t the only thing that we at Insured ASAP Insurance Agency can do for you.

We are a full-service independent insurance agency priding ourselves on excellent service in Illinois, Arizona, Colorado, and other states. We provide excellent guidance for home and commercial insurance, including auto insurance.

Do you qualify for car insurance tax deduction and need to know how much to claim? We have answers — ASAP! Get in touch or get a quote today!

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