Owner/Agent, Pelfrey Financial Services, Lexington, KY
Normally, you cannot deduct auto insurance from your taxes. If you are self-employed or own a business, a car used for that business can have expenses deducted with certain limitations.
To fully deduct insurance and other expenses on a vehicle, it must be used 100% for business purposes. If it is used for both personal and business, it becomes more complicated. With the simplest way, a flat amount per mile can be deducted for all business usage. The second way is to keep track of ALL expenses associated with the vehicle including gas, repairs, and insurance, as well as exact records about miles for business and personal use. The percentage of total miles used for business is the percentage of total expenses that can be deducted.
Caution should always be used taking business deductions such as vehicle expenses and home office expenses as the rules are very strict and those types of deductions can increase the likelihood of an audit.
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To fully deduct insurance and other expenses on a vehicle, it must be used 100% for business purposes. If it is used for both personal and business, it becomes more complicated. With the simplest way, a flat amount per mile can be deducted for all business usage. The second way is to keep track of ALL expenses associated with the vehicle including gas, repairs, and insurance, as well as exact records about miles for business and personal use. The percentage of total miles used for business is the percentage of total expenses that can be deducted.
Caution should always be used taking business deductions such as vehicle expenses and home office expenses as the rules are very strict and those types of deductions can increase the likelihood of an audit.