Is Your Auto Insurance Tax Deductible?
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Tax season is coming up fast. You want to take advantage of every possible deduction on your vehicle. Sometimes there are items you don’t even think about, that you may be able to use. For many small business owners, they often wonder, is your auto insurance tax deductible or not?
Car for Personal Use
Of course not, that’s the answer if you are using your car for personal use, like going to the gym to workout. If however, you operate an automobile exclusively for business purposes, you can deduct the cost of your premiums when you file annually. In addition, for convenience, you can add up all the costs you spent on the car, like gas and repairs and come to a sum total.
End of year taxes
This will make it much easier to do your taxes at the end of the year. Important note: always be truthful and honest about your automobile deductions. If you only rarely use your car for business then calculate those minor expenses. This will help you in the long run, in the event you get audited and need to show proof.
Doing taxes for yourself
If you are doing your taxes by yourself, you have two choices. First, you can add up the total expenses of your vehicle while conducting business. This may give you a smaller or higher number than the IRS guidelines.
The second choice is to use the IRS basic deduction rate simply. If you have a CPA or bookkeeper, they will usually advise you on what method will make you do not spend more than what you should.
Many business people prefer to calculate all of the real costs related to the operation of their vehicles. This is great to maximize the deductions, but you need to keep detailed records for every expense, no matter how minor it is.
So, if you buy just $10 in gas, keep the receipts. If you spend $400 on new tires, keep those larger expenses as well. If you lose a receipt, chances are you can get it via your bank or credit card records online.
Common items that can be deducted if you use your automobile solely for operating a business:
If you break the law and get a traffic ticket, you cannot deduct this expense. The best thing to do is go to traffic school and get it off your record so your insurance rates won’t go up.
Another deduction you might miss taking is the interest on the auto loan. If you exclusively use the car for your business, you can deduct all of this interest expense. If you only use part-time for a business, you can deduct part of the car loan interest costs.
With taxes more complicated than ever, you can see why so many people need qualified CPAs to take advantage of all the items that are deductible. If you are filing for the first time with self-employed deductions, it’s smart to see a CPA and have them file the first year.
The last thing you want when you start out is to get audited by the IRS. Although CPA costs are expensive, they can save you money. They can maximize all of your deductions, including things you might have overlooked, had you done your taxes on your own.
The best advice when it comes to taxes is to keep good records and organize them properly. If you insist on doing your own taxes, use programs like Quickbooks. Also, scan your receipts into a file based on each category. By doing the little things each day, you won’t have a huge headache when tax time comes.
Get Direct Auto Insurance Online and Save More
Now that you know when your car insurance is tax deductible, you should also shop around for better auto insurance rates. The best place to do that is online at sites like GoodtogoInsurance.
The quotes are free, and you will be matched with direct insurers that can save you hundreds. There is never any obligation to buy any policy. If you chose to buy, you could print your policy info and I.D cards all online. Get started now and see how simple it is to save with direct auto insurance pricing.