When You Cannot Deduct Auto Insurance Premium In Tax Claim
If we are talking about personal tax deductions then auto insurance premiums are not tax deductible. IRS clearly states that generally personal, living and family expenses are not tax deductible. In a scenario where you are incurring expenses which is a combination of business and personal expenditure then you will have to segregate the total expense into business and personal. Then you can deduct the business part.
When You Can Deduct Auto Insurance Premium In Tax Claim
By now it is clear that auto insurance premiums are tax deductible only if you are using your car for business purposes only. Hold on, before you file your returns and include the cost of auto insurance as deduction please read the tips mentioned below:
- There are two ways to go about filing for deductions. First is that you follow the standard deductions as laid down by the IRS. For the year 2013 the standard mileage rate is 56.5 cents. Individual deductions can be calculated by multiplying your business miles by 0.565 .Second option is that you do some homework and calculate the expense incurred while using your car for business purposes.
- If you are going to calculate the actual expense then you will have to maintain the record of all the declared information as a proof that all deductions are valid.
- If you are a self-employed professional and using your car for business purposes then you can deduct a certain percentage of interest on your auto loan. If you are an employee of an organization then this condition is not for you. As a self-employed individual you can report the use of your car as business expense in schedule C. As a self-employed individual you can claim 100% tax deduction regardless of your itemizing your deductions or taking as a standard deduction.
- Mileage Deductions: If you are driving your vehicle as a part of your employment requirement then you can claim mileage cost as deduction on your itemized taxes. Please note that this does not include you driving your car to and fro from home to work every day.
In the end remember that to successfully claim tax deductions on auto insurance premiums you have to maintain all the records of your business travel. The dates on which you traveled, number of miles you drove and the reason of travel on all business related journeys.