Can I Claim Car Insurance on My Taxes?

You are allowed to deduct car insurance premiums from your taxes if you use your vehicle for business purposes and are self-employed or pay the premiums yourself without being reimbursed by your employer. This lowers your taxable income, meaning you won’t have to pay taxes on the money you spend on auto insurance premiums throughout the year.

Keep reading to learn more about when car insurance is tax deductible and what other vehicle-related expenses you may be able to subtract from your taxable income.

On This Page

• 

  When Is Car Insurance Tax Deductible?

• 

  Are There Additional Auto-Related Tax Deductions?

• 

  How Do I Deduct Car Insurance on My Taxes?

• 

  Should I Itemize My Car-Related Tax Deductions?

• 

  How To Calculate Your Vehicle Expenses

• 

  FAQs

When Is Car Insurance Tax Deductible?

Car insurance is among the expenses you can deduct from your taxes if you use your car to conduct business-related activities.^[1] Examples of eligible commercial activities include driving from one job site to another as a construction worker, picking up customers for a rideshare service like Uber or delivering packages for Amazon.

The car insurance tax deduction is primarily for self-employed individuals but can apply to employees in certain situations. In addition, certain groups of people such as military reservists, performing artists and fee-basis public officials are eligible for special deductions related to owning and operating a vehicle.^[1]

When Isn’t Car Insurance Tax Deductible?

You can’t deduct car insurance premiums for a vehicle you exclusively use for personal purposes. Keep in mind that driving to work doesn’t count as a business activity for tax purposes, which means the deduction only applies if you have a company car or regularly use your personal vehicle to perform the duties of your job.^[2]

If you aren’t self-employed and don’t fall into one of the special categories mentioned in the previous section, then you can only deduct work-related vehicle expenses that you personally have to pay for.^[3] As a result, you won’t be able to deduct insurance premiums that your employer pays or reimburses you for.

Can I Deduct the Sales Tax on a New Car?

You can deduct the amount of money you pay in state and local sales taxes from your federal tax return including taxes you pay whenever you buy a new car as long as the vehicle’s sales tax is the same as the general sales tax in your area. However, if you opt to deduct your general sales taxes, you won’t be able to deduct your state and local income taxes.^[4]

In addition, the sales tax you pay on a new vehicle can be counted as part of the car’s original basis, which you can use to calculate how much of the car’s depreciated value you are allowed to deduct from your federal taxes.^[3]

Are There Additional Auto-Related Tax Deductions?

The following expenses are tax deductible in the same way that car insurance premiums are:^[3]

• Gasoline
• Oil
• Car repairs
• Tires
• Licenses
• Registration fees
• Lease payments
• Parking or garaging fees
• Tolls

If you are self-employed, you can deduct interest you have paid on the auto loan for a vehicle you use for business purposes. Meanwhile, anyone can take itemized deductions for state and local personal property taxes they’ve paid on their vehicles.^[3] You can also deduct the value of damaged and stolen vehicles as long as the losses can be attributed to a federally declared disaster and your insurance company did not reimburse you for them.^[5]

In addition, you can write off the sales price of a vehicle you donate to charity as long as the organization uses the vehicle to conduct charitable activities, makes substantial improvements to raise the car’s value or provides the car to a needy person for significantly less than its market value.^[6] Finally, transportation to attend a medical conference or receive medical care is tax deductible, meaning you can deduct expenses related to maintaining your personal vehicle if you use it for medical purposes.^[7]

How Do I Deduct Car Insurance on My Taxes?

For the most part, the amount of your car insurance costs that you can deduct from your taxes depends on how much you use your vehicle for business purposes.

If you exclusively use your car for commercial purposes, then you can deduct 100% of your vehicle operation expenses including auto insurance premiums.

Otherwise, you can deduct a percentage of your expenses based on the percentage of your vehicle usage that is devoted to business activities.^[1]

For example, if you deliver food for DoorDash and only 30% of your car’s mileage can be attributed to personal use, then you can deduct 70% of your overall vehicle expenses from your taxes. As a result, if all of your car-related costs add up to $12,000 in a year, you could write off $8,400 on your federal tax return.

Keep in mind that you will need commercial auto insurance to cover your vehicle while you are performing business activities. If you get a commercial endorsement for your personal auto insurance policy, then you may have to calculate the percentage of your insurance costs that go toward commercial activities. However, if you buy a separate commercial policy, you can likely deduct those premiums in full without deducting any of your personal policy’s premiums since your commercial insurance policy won’t cover personal use of your vehicle and vice versa.

Should I Itemize My Car-Related Tax Deductions?

You should only take itemized deductions for your vehicle ownership expenses if all of your deductible expenses collectively exceed the standard deduction for your tax filing status as listed in the below table. The majority of taxpayers are eligible for the standard deduction, meaning there’s generally no reason to itemize your deductions if taking the standard deduction would lead to greater tax savings.^[8]

How To Calculate Your Vehicle Expenses

When calculating vehicle expense deductions on your taxes, you can either use the actual expenses method or the standard mileage rate method. The actual expenses method involves keeping detailed records of the amount of money you spend on deductible car expenses over the course of the year and writing off this amount on your taxes or writing off a prorated amount based on your commercial use of the vehicle.^[3]

Conversely, the standard mileage rate method involves multiplying your vehicle’s mileage by a predetermined rate set by the Internal Revenue Service (IRS) and subtracting that amount from your taxable income. For 2024, the standard mileage rate is 67 cents per mile.^[9] As a result, if you drive 10,000 miles for business purposes in 2024, you could deduct $6,700 from your taxes regardless of your actual expenses.

Like the actual expenses method, the standard mileage rate method requires you to distinguish between commercial and personal use of your vehicle. In addition, if you ever intend to use the standard mileage rate method, you must use it during the first tax year that you use your car for business purposes. Afterward, you are free to use whichever method will save you the most money on your taxes.^[3]