Vehicles used primarily for work or owned by a business must be insured with commercial auto insurance. Personal auto insurance won’t provide coverage in these cases, but it is still important to have protection in case of an accident. If you insure your vehicle with commercial insurance, it’s possible to write off part of your insurance on your taxes. Be careful with the policy you purchase, however.
It’s crucial to make sure your vehicle actually qualifies for commercial auto insurance. A personal vehicle used to commute to and from work does not qualify for commercial auto insurance and should be covered with a personal auto policy. If you insure a personal vehicle with commercial insurance and the insurance agency discovers that the vehicle is not being used for business, they are well within their rights to drop you. If you have any questions about which policy you need, consider how the vehicle is used and how often it’s used for work. Taking an occasional client to lunch or sometimes picking up items for the office should be covered beneath a personal insurance policy. However, if you frequently travel for work, transport clients or deliver work items, you may need commercial auto insurance.
There is a line in between, too. If you use a vehicle for both business and personal use, you may partially deduct the cost from your taxes. This can only be done for the time when the vehicle is used for work purposes. For example, if you use the vehicle for work 80% of the time, you may deduct 80% of the insurance cost from your taxes. An exception would be if your employer reimburses you for car insurance.
Can You Write Off Car Losses on Your Taxes?
Generally, no. There is an exception for certain disasters such as named hurricanes and wildfires, but you generally cannot deduct any personal losses concerning your auto insurance policy. You also can’t write off a loss if you’ve already received compensation from your insurance company.
Car Insurance Write-Offs for Rideshare Drivers
Driving rideshare services such as Uber or Lyft presents a whole new range of risks. These services usually provide some type of insurance, though not always. You may write off your car insurance for the periods you are using the vehicle for work.
Tips for Deducting Car Insurance from Your Taxes
- Keep detailed records of when you are using the vehicle for work
- Keep records for at least three years
- Fill out Form 2106 under “Insurance” on your W-2
- Hire an accountant
Keep in mind that expenses that are compensated for, either by your employer or insurance agency, are not generally tax deductible. This includes possible mileage expenses. Gas is expensive, and if you use your vehicle for anything work-related that’s not commuting, you may be able to deduct the cost from your taxes as long as your employer doesn’t reimburse your traveling expenses.
How Much is Commercial Auto Insurance?
Commercial auto insurance costs an average of $900-$1,200 a year. This varies depending on the driver’s age, profession, gender, driving history, credit history and more. There are other ways to save on insurance premiums, as well, such as:
- Shopping for discounts (Good Driver discounts, Mature Driver discounts, Low Mileage discounts, etc.)
- Getting multiple quotes to find the cheapest rate
- Cutting unnecessary coverage
- Having a higher deductible
- Taking defensive driving classes
For businessowners looking for commercial auto insurance, be sure to check with your state’s requirements. Most states require a variation of commercial auto liability in order for businesses to operate work vehicles legally.
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