We are in the middle of tax season. To anyone, filing business taxes will probably seem like bit of a hassle. You don’t want to pay so much in taxes that you can’t make ends meet. So, if you pay honestly, you might face the advantage of certain tax deductions. One of these deductions might be a cut for those with commercial auto insurance. Why does this happen? How can it benefit you?
Why you need commercial auto insurance
Most states require all drivers to carry auto insurance. Those who operate vehicles for business are no exception. Commercial auto insurance will cover delivery drivers, realtors, ride-share operators and more. Indeed, it will usually apply for any driver who uses a car for business purposes. That way, with coverage, businesses can insure their own interests in the vehicles.
You can write off your premium cost
You’ll have to pay your commercial auto insurance premium regularly. Yet, if you maintain coverage, then you likely will be able to deduct the cost of the premiums from you taxes. By doing so, you can save in taxes what you will regularly pay for your premium. Thus, you won’t have to face something of a double-jeopardy situation when tax season comes around.
Often, you can deduct 100% of your premium costs for your taxes. You might also be able to deduct maintenance costs, mileage (for certain events) and gas fees as well. However, the tax code is not the same for everyone. Certain people might receive more of a tax benefit from others.
- Self-employed commercial drivers can mark off most costs under Schedule C taxes. Schedule C is your 1040 Profit or Loss from Business form.
- If you do not receive a gas and mileage reimbursement for your driving, you can claim these costs on your taxes. But, if your business provides you with such repayment, then you cannot deduct costs.
To save time, many commercial drivers opt to take a standard mileage deduction. The 2018 rate is 54.5 cents per mile driven. Yet, if you calculate that you spent more than the standard deduction on your car in the last year, you can subtract that amount. It will take some math to calculate, however.
You will often face special calculation rules. If you use your car for both business and personal reasons, you can only deduct a percentage of your travel costs. For example, if you use your car for business 30% of the time, then you can only deduct 30% of costs. Your best bet is to work with a tax professional to calculate your mileage and insurance costs. Therefore, you won’t run the risk of filing or deducting taxes incorrectly.
Also Read: How to Track and Vet Business Drivers