While it’s only the beginning of March, our taxes will be due before we know it. Instead of rushing to file just ahead of April 15th, wondering, “is car insurance tax deductible?” – find out the answer to your questions now, before it’s too late. Don’t let the taxman take you for all you’ve got! Keep reading below to learn if you can get more money back on your taxes by writing off your auto insurance policy.
According to findings made by CNN Money, the average American commuter spends 200 hours at a cost of $2,600 a year on their daily work commute. Broken down, that comes to $10 a day. That’s a lot of money just to go to work, and in some areas, the daily average is as much as $16. So essentially, you pay to go to work and you work to pay the bills. It’s a vicious cycle. The average commute stands at 45 minutes. What is the biggest money eater? Gasoline. While the U.S. is currently experiencing lower prices at the gas pump, history has shown that this seeming
blessing fluctuates. It wasn’t long ago that gas in the U.S. cost $4.11 a gallon.
To get those write-offs, New York-based tax attorney Julian Block recommended in an interview with Turbotax that an auto-using taxpayer first needs to figure out which of the two types of write-offs they are going to use. The first type is for personal-use vehicles, and the second for business-use vehicles. According to the Internal Revenue Service, this translates to Standard Mileage Rate and Actual Expenses.
Standard Mileage Rate: To use this tax deduction, you must own or lease the car. More requirements include that:
For more information, refer to this index of information from the IRS.
Actual Expenses: To use this tax deduction, the IRS states that you must determine what the actual cost is to operate your vehicle for business use compared to the overall use of the car. This includes things like:
Expenses like bridge tolls and parking fees applicable to business use are separately deductible. But remember, to get these tax deductions, you must keep records of your auto business expenses to support your statement. If the numbers you reported don’t add up, you’ll be in dire straights with the IRS.
Taxes are the adult-version of homework. No one wants to do it, but if that deadline isn’t met, we’re going to have a tough time making the grade (or avoiding costly penalties). Fortunately, laying out the groundwork for tax season is well worth it. The tax deductions save us money and keep our bank accounts full. Learn more about tax deductions by visiting CoverHound today.