Is Car Insurance Tax Deductible?

Fran
Fran Majidi
February 5, 2020

Tax season can be stressful, but it can also be an exciting chance to get some money back. You may or may not already know that if you donate a car, a tax deduction may be in order but did you know that you can claim your car and your car insurance on your taxes too? Your car may be just the ticket to a hefty federal or state tax check if you meet certain guidelines, especially if you use your car for business. We’ve compiled a list of ways you may be able to deduct your car or car expenses on your taxes. We also have some frequently asked questions about your car and taxes.

Is a Stolen Car Tax Deductible?

Yes, if your car was stolen, you qualify for a tax deduction. As proof, you must show that you filed a car insurance claim or a police report if you did not claim it because you did not have comprehensive insurance. If you did have comprehensive insurance and your claim was paid, you cannot deduct this loss again in taxes. If you paid a deductible and were reimbursed for the loss by the car insurance company, you can deduct the deductible amount that you had to pay before being paid out.

Is a Totaled Car Tax Deductible?

Yes, you can deduct the totaled car, if the car was not totaled due to negligence or a DUI. As proof, you must show that you filed a car insurance claim or a police report if you did not claim it because you did not have comprehensive insurance. If you did have comprehensive insurance and your claim was paid, you cannot deduct this loss again in taxes. If you paid a deductible and were reimbursed for the loss by the car insurance company, you can deduct the deductible amount that you had to pay before being paid out.

Is Donating a Car Tax Deductible?

Not all car donations are tax deductible. For instance, if you “donate” your car to your little brother, it doesn’t count. You must show proof that you donated to a valid charity or organization to be approved. These charities/organizations are called section 501(c)(3) organizations. For an individual to be able to deduct a donation in their taxes, the deduction must be itemized on a Schedule A for Form 1040; and it cannot be greater than 50% of your adjusted gross income.

Can You Deduct Sales Tax on a Car on Your Taxes?

Let’s face it, buying a car is expensive and paying sales tax is salt to the wound. You may not even be aware of the sales tax until you get your first bill and see an additional charge. In some states, sales tax for cars is exceptionally high too, so if you can, try to get back as much as you can come tax season.

In order to deduct sales tax on a newly purchased car, you’ll need to itemize the sales tax on a Schedule A on Form 1040. Without itemization, you cannot deduct the sales tax. It doesn’t matter if the car you bought is new or used. It also doesn’t matter where you bought the car. Other deductible items for your car include car registration fees.

If you live in a state that imposes income tax and sales tax, choose which you want to deduct. Also, if your state imposes a higher tax rate on vehicles, you can only deduct the “general rate.” For instance, if your state imposes a 7% sales tax on cars but the general sales tax is 6%, you can only deduct the 6% of your car’s sales tax. You’’ll have to eat the remaining 1%. To do this properly, you’ll need to show proof of the sales tax with a copy of the purchase agreement that you signed at the dealership.

Is a Car for Business Tax Deductible?

For the year 2019, the IRS is giving taxpayers who use a car for business a deduction of 58 cents per mile. Now freelancers and business owners who use their cars for business-related reasons can save quite a bit.

Here’s how to figure out how much to claim for a deduction: Keep a log of business mileage to show that you actually used the vehicle for work purposes. You can also keep receipts and detailed accounting for gas and oil as well as necessary visits to the mechanic.

See which will allow you to deduct more, 58 cents per mile or the sum of your other expenses.

Is Buying a Car Tax Deductible?

Unless you are the company owner and bought a car solely for business use, you will not be able to deduct the entire price of the car but only a portion. Most states do allow you to deduct the sales tax if you use the car for personal use. In order to be qualified for deductions, your car must primarily be used for business purposes, which excludes commuting to and from work. However, if you drive from the office to a client’s office, that counts as business usage.

If you determine that you are qualified for deductions, the following items can be deducted: parking expenses, interest on the loan, registration fees, lease expense, insurance, fuel, repairs and depreciation. You can choose to deduct these items or deduct per mileage, not both. Speak with a tax specialist to see which would benefit you more.

Is Car Loan Interest Tax Deductible?

If you only use your car for business purposes can you make a deduction with a car loan interest. But you have to choose between car operation costs or the standard mileage rate. (see above).

How Does the Electric Car Tax Credit Work?

The Alternative Motor Vehicle Tax Credit may only be claimed by you if you are the original purchaser of the vehicle. Basically, if you bought it used, you can’t claim anything. For your car to qualify, your vehicle must be propelled by power from one more cells which convert chemical energy into electricity.

There’s also the Qualified Plug-in Electric Drive Motor Vehicle Tax Credit. To qualify, the vehicle must run on an electric battery that is capable of being recharged from an external source of electricity. The IRS tax credit is $2,500 to $7,500 per new electric vehicle (EV). The car must have been purchased in 2019.

See if your car qualifies below:

  • American Honda Motor Co., Inc.: Accord (2014; $3,626 credit amount) and Clarity Plug-In Hybrid (2018 and 2019; $7,500)
  • AMP Electric Vehicles, Inc.: GCE and MLE (2012; $7,500)
  • Audi of America, LLC: A3 e-tron (2016, 2017, 2018; $$4,502), A3 e-tron ultra (2016; $4,502), and e-tron SUV (2019; $7,500)
  • Azure Dynamics, Inc.: Transit Connect Electric Vehicle (2011 and 2012; $7,500)
  • BMW of America: i3 Sedan (2014, 2015, 2016, 2017, 2018, 2019, and 2020; $7,500), BMW i3 (60Ah) Sedan (2017; $7,500), i3 Sedan with Range Extender (2014, 2015, 2016, 2017, 2018, and 2019; $7,500), i3s Sedan (2018, 2019, and 2020; $7,500), BMW i3s Sedan with Range Extender (2018 and 2019; $7,500), i8 (2014, 2015, 2016 and 2017; $3,793), i8 Coupe (2019 and 2020; $5,669), i8 Roadster (2019 and 2020; $5,669), X5 xDrive40e (2016, 2017 and 2018; $4,668), 330e (2016, 2017 and 2018; $4,001), 530e (2018 and 2019; $4,668), 530e (2020; $5,836), 530e xDrive (2018 and 2019; $4,668), 530e xDrive (2020; $5,836), 740e (2017; $4,668), 740e xDrive (2018 and 2019; $4,668), 745e xDrive (2020; $5,836), MINI Cooper S E Countryman ALL4 (2018 and 2019; $4,001), MINI Cooper S E Countryman ALL4 (2020; $5,002), MINI Cooper S E Hardtop 2 Door (2020; $7,500)
  • Boulder Electric Vehicles, Inc.: Delivery Van DV-500 (2013; $7,500), Electric Shuttle DV500 (2013; $7,500), Electric Flat Bed DV-500 (2013; $7,500), Electric Service Body DV-500 (2013; $7,500)
  • BYD Motors e6 Electric Vehicle (2012, 2013, 2014, 2015, 2016 and 2017; $7,500)
  • CODA Automotive: Sedan (Electric Vehicle manufactured by CODA Automotive Inc.) (2010 and 2012; $7,500)
  • Electric Vehicles International: (EVI)-MD (Medium Duty) Electric truck (2011 and 2012; $7,500) and EVI-WI (Walk-In) Electric truck (2011 and 2012; $7,500)
  • Electronic Motor Cars: EMC Model E36 7 Passenger Wagon (2010; $7,500), Model E36t Pick-Up truck (2010; $7,500), and Model E36v Utility Van (2010; $7,500)
  • FCA (Fiat Chrysler Automobiles) North America Holding, LLC.: Fiat 500e (2013, 2014, 2015, 2016, 2017, 2018 and 2019; $7,500) and Chrysler Pacifica PHEV (2017, 2018 and 2019; $7,500)
  • Fisker Automotive, Inc.: Karma Sedan (2012; $7,500)
  • Ford Motor Company: Focus Electric (2012, 2013, 2014, 2015, 2016, 2017 and 2018; $7,500), C-MAX Energi (2013, 2014, 2015, 2016 and 2017; $4,007), Fusion Energi (2013, 2014, 2015, 2016, 2017 and 2018; $4,007), Fusion Energi (2019 and 2020; $4,609)
  • General Motors, LLC: Chevrolet Bolt (2017-2019; $7,500 if acquired through 3/31/2019; $3,750 if acquired 4/1/2019 through 9/30/2019; $1,875 if acquired 10/1/2019 through 3/31/2020), Chevrolet Volt (2011-2019; $7,500 if acquired through 3/31/2019; $3,750 if acquired 4/1/2019 through 9/30/2019; $1,875 if acquired 10/1/2019 through 3/31/2020), Chevrolet Spark EV (2014-2016; $7,500 if acquired through 3/31/2019; $3,750 if acquired 4/1/2019 through 9/30/2019; $1,875 if acquired 10/1/2019 through 3/31/2020), Cadillac ELR (2014 and 2016; $7,500 if acquired through 3/31/2019; $3,750 if acquired 4/1/2019 through 9/30/2019; $1,875 if acquired 10/1/2019 through 3/31/2020), Cadillac CT6 Plug-In (2017-2018; $7,500 if acquired through 3/31/2019; $3,750 if acquired 4/1/2019 through 9/30/2019; $1,875 if acquired 10/1/2019 through 3/30/2020
  • Hyundai: Sonata Plug-in Hybrid Electric Vehicle (2016, 2017, 2018 and 2019; $4,919), Ioniq Electric Battery Vehicle (2017, 2018 and 2019; $7,500), Ioniq Plug-In Hybrid Electric Vehicle (2018 and 2019; $4,543), Kona Electric Vehicle (2019; $7,500)
  • Jaguar Land Rover North America, LLC.: I-Pace (First Edition, HSE, SE, S models) (2019; $7,500), I-Pace (HSE, SE, S models) (2020; $7,500), Land Rover Range Rover PHEV (HSE) (2019; $7,087), Range Rover PHEV (2020; $6,295), Land Rover Range Rover Sport PHEV (HSE) (2019; $7,087), Range Rover Sport PHEV (2020; $6,295)
  • Kandi: EX3 (2019 and 2020; $7,500), Kandi K22 (2019 and 2020; $7,500), Kandi K23 (2020; $7,500)
  • Karma: Revero (2018; $7,500)
  • Kia Motors America, Inc.: Soul Electric (2015, 2016, 2017, 2018 and 2019; $7,500), Optima Plug-In Hybrid (2017, 2018 and 2019; $4,919), Niro Plug-In Hybrid (2018 and 2019; $4,543), NIRO EV (2019; $7,500)
  • Mercedes-Benz USA, LLC: B-Class EV (B250e) (2014, 2015, 2016 and 2017; $7,500), S550e PHEV (2015, 2016, 2017; $4,460, revised 1/24/2018), GLE550e 4m PHEV (2016, 2017 and 2018; $4,460, revised 1/24/2018), GLC350e 4M PHEV (2018, 2019; $4,460), C350e PHEV (2016, 2017 and 2018; $3,501 (revised 1/24/2018), smart Coupe EV (2013, 2014, 2015, 2016, 2017 and 2018; $7,500), smart EQ Fortwo Coupe (2019; $7,500), smart Cabrio EV (2013, 2014, 2015, 2017 and 2018; $7,500), smart EQ Fortwo Cabrio (2019; $7,500)
  • Mitsubishi Motors North America, Inc.: i-MiEV (Electric Vehicle) (2012, 2014, 2016 and 2017; $7,500), Outlander PHEV (2018 and 2019; $5,836)
  • Nissan North America: LEAF (2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019; $7,500)
  • Polestar Automotive USA Inc.: Polestar 1 (2020; $7,500); Polestar 2 (2021; $7,500)
  • Porsche Cars North America, Inc.: 918 Spyder (2015; $3,667), Cayenne S E-Hybrid (2015, 2016, 2017 and 2018; $5,336), Cayenne S E-Hybrid (2019; $6,712), Panamera S E Hybrid (2014, 2015 and 2016; $4,752), Panamera 4PHEV (E-Hybrid, E-Hybrid Sport Turismo, E-Hybrid Executive, Turbo S E-Hybrid, Turbo S E-Hybrid Executive) (2018; $6,670); Panamera 4 PHEV (E-Hybrid, E-Hybrid Sport Turismo, E-Hybrid Executive, Turbo S E-Hybrid, Turbo S E-Hybrid Executive, Turbo S E-Hybrid Sport Turismo) (2019 and 2020; $6,712), Taycan Turbo EV (2020; $7,500), Taycan Turbo S EV (2020; $7,500),
  • Smart Fortwo Electric Drive Vehicle (same as Mercedes-Benz)
  • Subaru: Crosstrek Hybrid (2019 and 2020; $4,502)
  • Tesla, Inc.: Roadster (2008-2011; $7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019), Model S (2012-2019; $7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019), Model X (2016-2019; $7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019), Model 3 Standard Range Plus ($7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019), Model 3 Long Range (2017-2019; $7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019), Model 3 Long Range AWD and AWD Performance (2019; $7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019), Model 3 Mid Range (2018-2019; $7,500 if acquired through 12/31/2018; $3,750 if acquired 1/1/2019 through 6/30/2019; $1,875 if acquired 7/1/2019 through 12/31/2019)
  • Think NA: Think City EV (Electric Vehicle) (2011; $7,500)
  • Toyota Motor Sales, U.S.A., Inc.: Prius Prime Plug-in Hybrid (2017, 2018, 2019 and 2020; $4,502), Prius Plug-in Electric Drive Vehicle (2012, 2013, 2014 and 2015; $2,500), RAV4 EV (2012, 2013 and 2014; $7,500)
  • VIA Motors, Inc.: 2500 Extended Range Electric Passenger Van (2014; $7,500), VIA 1500 Extended Range Electric Truck 4WD (all body styles) (2014; $7,500), VIA 2500 Extended Range Electric Cargo Van (2014; $7,500), VIA 1500 Extended Range Electric Truck 2WD (All body styles) (2014; $7,500)
  • Volkswagen Group of America: e-Golf (2015, 2016, 2017, 2018 and 2019; $7,500)
  • Volvo Cars of North America, LLC: XC90 (2018, 2019; $5,002), XC90 Excellence (2018 and 2019; $5,002), XC60 (2018 and 2019; $5,002), S90 (2018 and 2019; $5,002); XC-90 T8 Twin Engine Plug in Hybrid (2016 and 2017; $4,585)
  • Wheego Electric Cars, Inc.: LiFe Electric Vehicle (2011; $7,500)
  • Zenith Motors, Inc.: Electric Van (2014, 2015, 2016 and 2017; $7,500), Electric Minibus (2016 and 2017; $7,500)
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