Is Car Insurance Tax Deductible for Your Business?

Car Insurance is partially tax deductible for business purposes. You can only deduct the portion that is directly used for your business. Accurate tracking and documentation of your business usage percentage is essential.

Key Rules for Deducting Car Insurance

ONLY deductible if you choose the Actual Expense Method instead of Standard Mileage Rate. If using the 70¢/mile rate, insurance is already built in and cannot be deducted separately.

Requirements to Claim This Deduction

• Only under Actual Expense Method
• Cannot deduct if using Standard Mileage Rate
• Prorate based on business miles percentage

How to Document Car Insurance for Tax Purposes

Proper documentation is critical for any business deduction. For car insurance, you should:

• Keep all receipts and invoices showing the amount paid
• Record the date of the expense and the business purpose
• If mixed-use, maintain a log showing business vs. personal usage
• Store records for at least 3 years (7 years for major purchases)

Source: IRS Publication 463. This information is for educational purposes only. Consult a qualified tax professional for advice specific to your situation.