As people across the country begin to gather their documents in order to file taxes, some may be able to claim auto expenses as a deduction. Problem is, many do not realize that they could actually claim such things as their auto insurance premiums, thus helping to save on what they paid over the year. What it comes down to, for most people, is how you go about deducting your auto expenses from the start.
If you have a vehicle that is used for business purposes, you may be one of those who are eligible to deduct auto expenses when you file your taxes. The government allows for either taking the standard mileage rate, which is currently 50 cents per mile, or by taking the actual car expenses route. Many people simply opt for taking the standard mileage rate, because it is easier to figure out and keep track of. But this simplicity could be costing you.
You should keep track throughout the year of exactly what your actual car expenses were; it could add up to much more money in your pocket. This is because, when you track the actual car expenses for the year, you are able to deduct auto insurance premiums, as well as numerous other expenses like depreciation, maintenance, parking fees, garage rent, lease payments, tires, licenses, repairs, oil, tolls, and even vehicle registration.
Once you make a decision about which route you are going to take, you are stuck with that choice until the following tax year. If you are not sure which is the best route for you, keep track of all the auto expenses you have for one year by saving the receipts and maintaining a running tally. Also keep track of all of your mileage. At the end of the year, add both and see which approach offers the biggest overall savings.
Some people may qualify to use both the actual car expenses and the standard mileage rate. Knowing which one you can use may be a bit confusing, so check with the Internal Revenue Service to see which one you qualify for. But when it comes to saving on your insurance rates, you may find that the better route is to keep track of all auto expenses, especially if you are paying higher premiums based on your vehicle type or the number of miles you drive per year.
