Is car insurance tax deductible?

Car insurance is tax deductible as part of a list of expenses for certain individuals. Generally, people who are self-employed can deduct car insurance, but there are a few other specific individuals for whom car insurance is tax deductible, such as for armed forces reservists or qualified performing artists.

Let’s take a closer look at the statement above. First, let’s talk about the list of expenses. While you can deduct the cost of your car insurance premiums, they are just one of the many items that you can include as part of using the “actual car expenses” method.

Here are the other items you can include as part of your expenses:

• Deductible car repairs
• Depreciation
• Gas and oil
• Garage rent
• Lease payments (subject to the lease inclusion amount)
• Registration fees and licenses
• Tires
• Tolls and parking fees

Is auto insurance tax deductible for self-employed individuals only?

Self-employed workers aren’t the only ones who can deduct car insurance. There’s a short list of other types of individuals for whom car expenses, including auto insurance, are tax deductible.

Those individuals are:

• Armed forces reservists who are traveling up to 100 miles away from their home
• Qualified performing artists
• Fee-basis state or local government officials

Can you deduct car insurance and mileage?

No, you’ll need to choose which way you want to offset vehicle expenses. Generally, you can deduct unreimbursed vehicle expenses using one of these methods:

• Standard mileage – $0.655 per mile in 2023. If you use the standard mileage rate, you cannot deduct auto insurance premiums as a separate expense. However, you can still deduct tolls and parking fees.
• Actual vehicle expenses – This includes car insurance and the other items listed above.

If you’re not sure which one you want to use, or which may let you deduct more, it may help to review the mileage deduction rules.

Now you know you can deduct car insurance, but how do you do it?

If you use your car solely for business, you won’t need to prorate your deduction. However, many people use a personal car for both personal and business purposes. To figure out what applies to your taxes, you’ll divide the expenses between personal and business use based on the miles that you drive.

For example, if 70% of the miles you drive are for business, and the other 30% are for personal, you’ll generally be able to apply 70% of your expenses to your deduction.

You’ll report your expenses on one of two tax forms. If you’re self-employed, you’ll add the information to your Schedule C. For the other scenarios, you’ll use Form 2106.

Finding help for your car insurance tax deduction

When it’s time to calculate your expenses and complete your forms, we understand you might want some help. That’s why H&R Block is here to help.

Whether you choose to work with one of our knowledgeable tax pros or file your taxes with H&R Block Online, you can count on H&R Block to help navigate your car related deductions.