Is vehicle insurance a business expense?

Your car insurance is a business expense if you use the car for necessary business-related travel. You can support the expense claim by purchasing business coverage for the vehicle.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State...

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Reviewed byJoel Ohman
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UPDATED: Jul 1, 2020

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Here's what you need to know...

  • When it comes to determining what is a business expense, vehicle insurance is one that often comes to mind depending on your type of business
  • Your vehicle insurance may be considered a business expense, meaning that it may be included in your business expenses during your annual tax filing
  • However, there are some stipulations regarding when vehicle insurance may qualify

When it comes to managing your business expenses, determining what would be considered such an expense is often a difficult first step.

The vehicle insurance for your car may be considered a business related expense, but it often depends on what insurance you carry and your business type.

It’s important to remember that your insurance carrier may not be able to help you with these concerns, but there are other resources available if you have questions or concerns.

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What type of business are you running?

To determine if you can consider your vehicle insurance a business expense, you need to determine if you are operating a business that would consider it an ordinary and necessary expense.

This also means that the expense must be one that you use in your business instead of being a personal expense.

If you are using your vehicle for both personal and business use, determining how to properly document your expenses may be a difficult task.

It’s important to remember that you cannot claim personal auto insurance as a business expense in many cases, so speak to your agent and choose the coverage that works for your needs and your expenses.

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Do you have the right type of vehicle insurance?

When it comes to purchasing insurance for a vehicle, choosing the right type of coverage is important if you want to consider it a business-related expense.

Depending on how you operate your business, you may already own a Businessowners Policy, but this policy normally will not cover any vehicles you operate for work-related reasons.

In many instances, you will need to purchase a separate business vehicle insurance policy, which will be designed to protect your vehicle or vehicles from the risks that it may encounter, such as being involved in an accident while transporting materials or goods.

If you are not sure that a business auto insurance policy is right for you, speak to your insurance agent about your vehicle use and your business operations.

It’s important to remember that your personal auto insurance may provide some coverage for business use, but you will need to confirm what coverage is available.

Each insurance provider is different in what their policies will cover, so contact them with any questions or concerns.

Conclusion

Determining if your expenses are related to the operation of your business can be a difficult process. There are a few important things to remember when trying to list your business expenses, especially when it comes to vehicles and vehicle insurance.

If you are not using your vehicle for your business operations, or you are running a business that traditionally does not need a vehicle, then it may be difficult to label your insurance a business expense.

However, if you are working in or running an operation that would traditionally require a vehicle, then your insurance may be considered an ordinary expense.

Another thing to consider is what type of vehicle insurance you carry. If you are carrying personal vehicle insurance, you may have a harder time labeling this as an expense. Additionally, your insurance provider may be unwilling to cover you in the event of an incident.

However, if you purchase business auto insurance, it will be easier to prove it is a business expense and it will be easier in the event you need to file a claim.

Remember that there are resources available to help you decide on the right coverage for your needs and to help you determine if it qualifies as an expense. Your insurance provider can often help you evaluate your needs based on the businesses operations.

Also, the Internal Revenue Service operates a website with a wealth of information regarding business expenses and business operations.

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