It’s officially tax season—the time of year when people scramble to compile all their deductible business expenses and tax forms. All the chaos can distract many from obtaining the maximum refund. As a business owner, it’s easy to remember the typical tax write-offs such as travel, rent, salaries, and benefits. But when amassing the long list of deductions, be sure to look into one of the most forgotten write-offs: car and commercial vehicle insurance. If your car is used for business-related purposes or, in some circumstances, personal use only, you can recover funds this season by ensuring your car insurance is tax-deductible.

Is Your Car Used for Business?

For many, a car plays a fundamental role in one’s ability to perform their job, beyond just getting them to the office. To determine if your car insurance is deductible, ask yourself the following questions:

• Does your employer compensate you for business-related car expenses? If you do not receive reimbursement for traveling to a business conference or picking up supplies from a vendor, your personal car insurance can be considered a tax deduction. Pertinent to this point, it’s important to discuss non-owner insurance with your employer prior to using your vehicle for business-related matters.
• Are you self-employed and using your vehicle for business purposes? When running your own business, be sure to keep tabs on your standard mileage or vehicle expenses. But bear in mind, if you report your standard mileage, you must deduct the mileage at the standard rate, which for 2020 is 57.5 cents per mile, per the IRS. You should also record tolls and parking fees, as those factors are deductible as well.
• Have you incurred auto-related expenses as a result of business usage? Keep your receipts for your vehicle repairs and calculate the depreciation of value from your car’s extended usage. If these costs together equal more than 2% of your adjusted gross income, your insurance premium may qualify as a deduction.

As a side note, if you’re a business owner, you must cover all your company vehicles with commercial insurance, as one’s personal auto insurance won’t cover any damages to business-owned vehicles.

Have You Suffered a Vehicle Loss or Theft?

If you were a victim of theft or your car was deemed a “total loss,” regardless of whether your car is for business or strictly personal use, you can claim loss deductions. But to determine if you qualify, you must confirm the following:

• You filed a car insurance or commercial vehicle insurance
• The damages were not a result of your negligence.
• You were not fully reimbursed for your loss by your insurance provider, except in cases where the damages exceeded your policy limit.
• The loss equaled more than 10% of your adjusted growth income.

Discuss Car Insurance Deductions with a Professional

Before submitting your tax return, it’s always best to consult your accountant or a tax professional. A professional can determine if you qualify for car insurance deductions and confirm your tax forms are being filled out correctly. This will save you time in the long run, especially if the IRS suspects an error in your documentation and requests proof of deductions. No one wants to spend extra time amending their tax returns.

Getting the most from your tax return goes a long way in improving the financial success of you or your business, which is why it’s great discovering a necessity such as car insurance is tax-deductible. You can use the recovered funds to help pay for future premiums or other personal or business expenses. To make those funds last, make sure you are outfitted with the car insurance or commercial vehicle insurance that provides the best coverage. Backed by years of experience and success, TJ Woods Insurance is the right agency to help you find the perfect policy. For free insurance quotes, be sure to contact us today.