Is Car Insurance Tax Deductible?

As a self-employed individual or a small business owner, you can deduct your car insurance premiums for the business portion of your car’s annual mileage.

While most employees aren’t eligible, a few special groups can still write off unreimbursed work-related vehicle expenses—more on that in the section below.

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

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

Self-employed individuals and small businesses

If you’re self-employed, a freelancer, an independent contractor, or you run a small business, the IRS lets you write off the ordinary and necessary business expenses for using your car for work.  If you’re unsure if your driving falls under that category, you can find examples of business and non-business driving below.

Special employee groups

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

• Armed Forces reservist
• Fee-basis state or local government officer
• Qualified performing artist

Note: You won’t need to itemize deductions on your tax return to qualify.

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Determine your qualifying vehicle use

The IRS requires that you use your vehicle for eligible business purposes to make car insurance costs tax deductible.

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
• Running 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 vs commuting miles to learn more.

Standard mileage deduction vs writing off vehicle expenses 

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 the 2025 IRS mileage rate of $0.70 per mile (for the 2025 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 in 2025. Based on the standard mileage rate of $0.70, your deduction would be $5,600.

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 on how to claim mileage with the IRS.

Actual expenses method

You can also claim mileage with 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
• License 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 a personal versus business mileage calculation. 

Then, you must total those expenses and multiply them by the percentage of the vehicle’s business use to get the deduction amount. 

Note: 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 spent $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.

How to write off your car insurance

After you’ve picked a deduction method, you’ll need the right documentation and tax forms to claim car insurance and other vehicle costs as a business expense.

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. A mileage tracking app can help by automatically tracking all your business driving. 

You’ll also need receipts, invoices, or similar documents if you’re using the actual expenses method since you’ll need proof of each expense 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.

As self-employed

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 that you fill out Part IV with vehicle information, such as the initial business vehicle service date, your mileage for different purposes, and the availability of evidence to back up your deduction claim. 

As an employee (qualified employee groups)

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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