Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Oct 14, 2020

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Here's what you need to know...

  • If you’re assigned to a temporary work location, then you may write off the mileage driven to that location
  • Any payments made for lost wages should be claimed as income on your tax return
  • You can typically choose between deducting your state income tax or the money you pay in sales tax

If you’re a business owner, or routinely drive your personal car for your job, then you may be able to deduct some of your car-related expenses on your taxes.

While vehicle insurance is not typically deductible, there are some exceptions to the rule.

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Table of Contents

Business Owners and Car Insurance

As a business owner, you’re able to write off a host of expenses, including part of your car insurance. According to experts, you can add the car insurance to your business deductions. However, you can only write off a pro rata portion of the premiums.

If the car is used exclusively for business, then you can take 100 percent of the insurance as a deduction.

If the car is also used as a personal vehicle, then you’ll have to determine what percentage of your miles are driven for business and based your pro rata deduction on this amount.

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Businesses Also Write Off Repairs

In addition to the insurance, there are also numerous other expenses that businesses can write off when it comes to their vehicles. It’s recommended that you keep track of the receipts so that you’ll have written proof.

Here are the following deductions you’ll need proof for:

  • Depreciation
  • Lease payments
  • Registration fees
  • Licenses
  • Gas and oil
  • Garage rent and parking fees
  • Repairs and maintenance, including tires

Standard Deduction Vs. Actual Expenses

Keeping track of every single receipt can be a hassle, so there is an easier way. The Standard Mileage Rate deduction allows you to simply take a set deduction for every business mile driven.

It’s faster and easier than trying to determine what the actual expenses were. There are some limitations to using this deduction.

It cannot be taken if the vehicle is used for hire, if the taxpayer has five or more cars in operation at one time, or if the taxpayer uses claims depreciation or the section 179 deduction.

As with actual expenses, you should ideally have written evidence of the miles driven for business, but this is not required.

Business Miles Driven For Others

You don’t have to be the business owner to take these deductions. If you drive your own car for your employer, then may qualify for additional deductions, but you’ll need to tread carefully before claiming any miles on your taxes.

The first thing to remember is that your commuting costs from home to work may not be written off, but you can write off the mileage from your work places to other areas you have to drive to for your job.

If you’re assigned to a temporary work location, then you may write off the mileage driven to that location.

Although you cannot write off the expenses on your taxes, you also do not have to claim the expense payments as income on your taxes.

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Insurance Claims and Payouts

In addition to knowing how to handle the insurance premiums, you should also understand how any claims are handled. If you’re in an accident, you may receive payments for certain expenses.

Reimbursements for damages to your car, medical costs and pain and suffering are not generally taxable.

Any payments made for lost wages should be claimed as income on your tax return.

Uninsured Losses are a Deduction

While you probably cannot write off your premiums, you can write off uninsured losses from theft or casualty.

This is good news for people who only carry liability insurance and don’t have coverage for earthquakes, fires, and accidents.

There are limits to how the losses may be claimed, but it’s possible to carry unused loss balances over and claim them in following years.

New Car Purchases and New Deductions

You can typically choose between deducting your state income tax or the money you pay in sales tax. You’re required to look at the numbers and see which one is higher because you can only take one of the two.

However, if you bought a new car this year, then the sales tax can easily outweigh your state income tax.

If you live in a state that charges registration fees based on the value of your car, then you may also be able to write off this sizable tax payment.

Car insurance can be expensive, but you don’t have to rely on tax deductions to bring the cost down.

It’s far more efficient and cost-effective to shop around for lower rates so that you can save money on your monthly budget. premiums.

If you are going to use your vehicle for business, take the time to speak with your insurance provider about the coverage.  You may need a special policy to ensure that you’re fully covered to use the car in a commercial trade.

While you may not be able to lower your tax bill, it’s still possible to save money by reducing your insurance premiums.

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