Business owners need to proactively manage their finances. Many buy commercial auto insurance to minimize the risk associated with accidents. Yet, coverage is expensive. Can you write off this expense? It might be possible, and here’s what you should consider.
Auto Insurance and Taxes for Business
Business owners may benefit from carrying commercial auto insurance for many reasons. It minimizes the risk you have to pay out-of-pocket costs after an accident. To help defray the cost of coverage, many business owners write it off as a tax deduction.
Every business owner should speak to a tax professional about this benefit. Not every vehicle or driver qualifies; usually, only those owned and operated as a component of the business will. Still, this is one of the best ways to reduce your overall costs of taxation.
When Can It Apply?
Commercial auto insurance is tax-deductible in most cases. However, it usually only applies if the business uses the car as part of operations. For example, the car you drive to work is not necessarily a tax deduction. On the other hand, the insurance you pay to cover your company’s fleet of delivery trucks may be.
For self-employed individuals, whether commercial auto insurance offers tax benefits falls on how the vehicle owner uses the car. You may be able to deduct the commercial auto insurance premium on your Schedule C tax form.
Some employees may be able to deduct this coverage on Form 2106, Employee Business Expenses. This usually applies only if you don’t receive payment for expenses related to your car. It also does not apply to situations where you receive mileage for using your car for your business.
Contact your tax professional to discuss the way you use your vehicle and the cost of commercial auto insurance. In many situations, you may be able to deduct that full price, giving you a sizable discount on taxes.