Filing taxes can be stressful, that is why it’s important to claim your expenses throughout the year so that you can get a refund. In the process of gathering all your forms and discussing with your accountant, one of the questions which you may ask yourself is your car insurance tax deductible? You may get tax deductions, depending on the way of how you will use your car.
The kind of tax deductions for your Car insurance that you are eligible will depend on your employment status.
1. When you are a freelancer or self-employed
In case you are self-employed and you drive your car to your business place, then you can claim some of the car insurance premiums. Also, there are some expenses which can be deducted when you drive your car to your place of work. Some of these expenses include when you spend on Lease payments, repairs, tires, gas, tolls and parking.
When you use your car for business-related activities
In case you use your car for business-related activities, then you may not be required to claim your auto insurance premium when filing taxes. Some of these activities may include driving to a business conference, driving to visit your clients, using your car in delivering or picking up business supplies. However, if you simply commute to and from work, then this will not be counted as a business-related activity.
2. When you keep accurate tax filing records
If you wish to qualify for car insurance tax deductions from the yearly tax bill, then you should make an effort of keeping accurate records. For instance, if you drive to your place of work 4 hours on day one, 2 hours day two and 5 hours day three, it can be difficult to monitor your driving. This is possible if you do not keep records on the average hours you drive in a day. Remember to keep all the records on your driving history for at least 3 years. If the tax authority in Ajax requests you to justify for you the tax write off for your car insurance Ajax, you can show them all your records.
3. Vehicle loss of theft
In case you have suffered theft or loss of your vehicle, then you can be allowed to receive tax deductions when filing taxes. A car can be considered as a loss when it gets damaged to the point that it cannot be repaired. For you to qualify for a tax deduction for car theft or loss you must do the following:
If you go to a car accident then it should not be that you were negligent.
You should file a car insurance claim.
The total costs should be more than $100
The insurance company cannot reimburse you completely when you incur a loss, but in case the damage level exceeds the policy, then you can deduct the difference. 4. You can get a partial car insurance deduction if you use your car for both personal use and business.
You can get some deductions for your insurance from the total taxes, but it must be for the time which you used your car for business activities.
In summary, you need to discuss with your accountant all car-related tax deduction before you file tax returns in Ajax. The accountant is in a better position of advising you on the deductions which you can qualify and how you can complete filing all taxes correctly. Since tax returns do come almost at the same time every year, it’s will be good if you set a reminder so that you can take advantage of the car insurance discounts.