Is car insurance tax deductible?

Yes, there are cases when the insurance is tax deductible. For instance, if your car or vehicle is being used for business you can be eligible for a tax deduction. This is known as Schedule C if you are self-employed.

If your vehicle is registered for business but assigned to you as a company car, you will need to fill up the Form 2106 or the Employee Business Expense for. However, this should only apply for those who pay for the insurance, not those whose insurance is paid for by the company.

In addition, you automatically are not allowed to file for tax deduction if you get reimbursed for mileage or other car expenses. This is because it would be a double deduction.

You will need to choose one only and you cannot switch midstream from actual expense deduction to mileage for as long as you have the car.  It is best to consult a tax lawyer or refer to the IRS for more information on your specific case.

 

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