Can You Write Off Car Insurance?

As a self-employed individual or small business, you can qualify to write off your car insurance premiums for the business portion of your vehicle’s annual mileage. While most employees aren’t currently eligible, a few special groups can still write off unreimbursed work-related vehicle expenses.

How to tell if you’re eligible to deduct car insurance premiums

To deduct car insurance premiums, you must fall within one of the eligible groups of taxpayers.

Self-employed individuals and small businesses

If you run a small business, freelance or are another type of self-employed person, the IRS lets you write off the ordinary and necessary business expenses for the business use of your vehicle.

Special employee groups

The Tax Cuts and Jobs Act of 2017 eliminated the ability for most employees to write off unreimbursed work expenses in general through 2025. However, the IRS lets you deduct car insurance premiums and other relevant costs if you’re one of the following types of employees:

• Armed Forces reservist
• Fee-basis state or local government officer
• Qualified performing artist
• Employee with work expenses related to impairment

Note that you won’t need to itemize deductions on your tax return to qualify.

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Determining your qualifying vehicle use

The IRS also requires that you’ve used your vehicle for eligible business purposes to deduct your car insurance costs.

What counts as business-related driving

Examples of qualified business driving can include:

• Driving between two different work locations
• Driving to meet with your customers or clients
• Completing errands for your work or business
• Traveling between your house and a temporary location (where you’ll work for less than one year, per IRS rules)

What doesn’t count as business-related driving

You can’t write off vehicle-related expenses attributed to the following:

• Commuting between your home and a permanent workplace
• Commuting between your home and a second workplace
• Hauling business equipment and tools when you’re not working
• Displaying company advertisements while driving for non-business purposes
• Driving for personal errands or pleasure 

Check out our guide on business miles versus commuting miles to learn more.

Methods for deducting car insurance premiums

The IRS allows you to deduct your business mileage at a standard rate or write off the business portion of your actual vehicle expenses, including car insurance premiums. Consider the requirements for both methods and your potential deduction amount to decide which to choose.

Standard mileage rate

Rather than directly writing off your car insurance expenses, you can deduct your total eligible business mileage at a rate of $0.67 per mile (for the 2024 tax year). This method is simple as long as you carefully track your mileage. 

Example: Let’s say that you drive 8,000 miles for eligible business purposes this year. Based on the current standard mileage rate of $0.67, your deduction would be $5,360.

You can use this method whether you own or lease your vehicle, but the IRS details some restrictions. For example, you won’t qualify if you use more than five vehicles simultaneously or claim certain depreciation deductions. If you’re leasing the car, you can’t switch between the standard mileage rate and actual expenses method either.

Learn more about how to claim mileage with the IRS.

Actual expenses method

You can use the actual expenses method to directly deduct the business-related portion of your car insurance premiums and other vehicle costs, including:

• Depreciation and car loan interest (for vehicle owners)
• Lease payments or rental fees (for non-owners)
• Gas, oil, and electricity
• Licenses fees
• Registration fees
• Vehicle maintenance, such as oil changes
• Vehicle repairs, such as new tires or brakes

This method is more tedious since you need accurate records of expenses and your personal versus business mileage. Then, you must total those expenses and multiply them by the percentage of business vehicle use to get the deduction amount. Unless you only use your vehicle for business, you can expect only a partial write-off for car insurance and other costs. 

Example: Say that 40% of your leased vehicle’s mileage is for eligible business travel. If you spend $1,500 on car insurance premiums, you could deduct 40% of that cost, or $600. Plus, you can deduct 40% of other eligible vehicle expenses, such as gas and lease payments.

Writing off your car insurance premiums

After you’ve chosen a deduction method, you’ll need the right documentation and tax forms to write off your car insurance premiums and other vehicle expenses.

Keep accurate and detailed records

Whether you pick the actual expenses method or standard mileage rate, keep detailed driving logs to determine the business portion of your mileage and have proof in case the IRS audits you.

You’ll also need receipts, invoices or similar documents if you’re using the actual expenses method since you’ll need each expense amount for the calculation. You should be able to find your car insurance cost on your renewal bill, bank statement, or payment receipt.

Report your vehicle expenses on your tax forms

You must report your car insurance premiums and other eligible vehicle expenses on your Form 1040, but the specifics depend on your employment situation.

If you’re a small business or self-employed individual, you’ll enter your car and truck expenses on Line 9 of Schedule C, Part II. The IRS also requires filling out Part IV with vehicle information, such as the initial business vehicle service date, your mileage for different purposes and the availability of evidence for your deduction.

If you’re part of one of the qualified employee groups, you’ll fill out Form 2106 instead. Part II helps you determine your eligible vehicle expenses, which you’ll report on Line 1 of Part I.

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