When it comes to driving, plenty of people find that the cost of insurance in the United States can be a little unfair. Many insurers strive to provide fairer prices without sacrificing on the quality of their coverage policies. There are ways for people that meet certain types of criteria to take advantage of lower vehicular expenses. If you are one of the employers or employees asking ‘can car insurance be tax deductible,’ we’re sure that you’ll be surprised by the answer.
Can Car Insurance Be Tax Deductible?
Typically the answer is yes, but only if you meet specific terms and conditions. For instance, if you use your vehicle for leisure activities, or to get from one place to another. Your car will be considered a personal asset – so it isn’t subjected to the same as a business asset would be. If you use the vehicle exclusively for professional purposes; however, the entire costs associated with its running can be considered tax deductible.
How Does This Work?
Perhaps you own a company car, or maybe you have two cars, and one is used for a mobile hairdressing business exclusively. The former vehicle is your personal property, but the other is utilized for business purposes. As a result, the gas, and maintenance, and insurance premiums will all be considered deductible when it comes to paying tax.
Businesses take advantage of this benefit. If you meet the above criteria, the entire operation of the vehicle could be considered an expense, and you won’t be obligated to pay any of the servicing fees whatsoever. Of course, the day to day running might require you to cover the cost in full or to pay for cleaning. When it comes to reclaiming these costs, you can list them all as business expenses. From here, the total amount can be deducted from any tax that you owe.
Are There Any Restrictions?
Yes – one, in particular, may affect employees of a business that relies on company cars if your employer pays for the cost of the vehicle or reimburses you for any expenses that the vehicle’s use incurs.
Don’t expect to reclaim these sums of money and attempting to do so is considered unlawful.
In general, this tax relief is intended for those that use their car for business and business alone. Trips to the local store won’t be covered, nor will leisure drives. Any use that relates to the car being used for professional purposes can be tax deductible. You will need to keep your receipts; however, just in case the IRS wants further information on the expenses that you have claimed. They may want to find out if the vehicle is genuinely being used for business purposes, or leisure and day to day life instead.