Business owners need to be aggressive in managing their finances. Many buy commercial auto insurance to help minimize the risk associated with the financial loss from an accident. Yet, your coverage costs a significant amount of money. Can you write off this expense? It may be possible to do just that. Here is 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 occurs. To help defray the cost of your coverage, most business owners can write it off as a tax deduction. That's a winning situation for any business operator.
To be clear, every business should speak to their tax professional about this benefit. Not every vehicle or driver will qualify. Usually, only those owned and operated as a component of the business will. Still, you may find this is one of the best ways for you to reduce your overall costs of taxation. Though it may not be a large deduction, it is one way to reduce your costs.
When Can It Apply?
Commercial auto insurance is tax-deductible in most cases. However, it usually will only apply if the business uses the car as a component 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 again 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 their Form 2106, Employee Business Expenses. This usually applies only if you do not 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.
What should you do if you think you qualify? Contact your tax professional. Discuss the way you use your vehicle. Then, discuss your commercial auto insurance cost. In many situations, you may be able to deduct that full price, giving you a sizable discount on taxes. For a small business owner, this can be a key benefit to owning an insurance policy beyond just protecting your assets.
Also Read: How Much Property Coverage Does Your Commercial Auto Insurance Need?