Only in limited cases: if you’re self-employed, you can deduct the business share of your car insurance when you claim actual car expenses, and premiums for personal driving aren’t deductible at all. The IRS standard mileage rate already accounts for insurance, so drivers who use it can’t add premiums on top.
W-2 employees lost the deduction for unreimbursed car costs starting with tax year 2018, and a 2025 federal law made that permanent. A few groups the IRS names, such as Armed Forces reservists, still qualify.
Key Takeaways
- Premiums for personal driving, including your commute, aren’t deductible on a federal return. The IRS also leaves insurance out of the car deductions for medical and charity driving.
- Self-employed people and independent gig drivers can count the business share of their premium as an actual car expense on Schedule C. The standard mileage rate already includes insurance.
- The IRS says the One Big Beautiful Bill Act made the ban on W-2 employees’ unreimbursed car deductions permanent, so it continues for 2026 and later. Reservists, qualified performing artists and fee-basis officials are exceptions.
- Compare both methods in the first year you use a car you own for business. If you skip the standard mileage rate that year, you can’t switch to it later for that car.
Who Can Deduct Car Insurance?
| Your situation | Can you deduct car insurance? |
|---|---|
| Personal driving and commuting | No |
| Self-employed, including independent app-based drivers | The business-use share, with the actual expense method only |
| W-2 employee driving for work | No, for 2018 and later, with narrow exceptions |
| Armed Forces reservist, qualified performing artist or fee-basis official | In limited cases, on Form 2106 |
| Medical or charity driving | No |
Personal Driving and Commuting
IRS Topic 510 says that if you use a car for both business and personal purposes, “you may deduct only the cost of its business use.” Commuting counts as personal: Publication 463 rules out driving “between your home and your main or regular place of work,” however far it is.
Publication 502 also excludes insurance from medical car expenses, and Publication 526 rules out “the costs of tires or insurance” for volunteer driving.
A tax deduction is also separate from your policy’s deductible, the amount you pay toward a covered claim.
Savings on a personal premium come from the policy itself, such as the car insurance discounts you qualify for.
Self-Employed: Actual Expenses or the Standard Mileage Rate
Actual Expense Method
Publication 463 lists insurance among actual car expenses, with gas, oil, repairs, tires, registration and depreciation or lease payments. You total the year’s costs and multiply by your business-use percentage. The 2025 Schedule C instructions put the business portion of “gasoline, oil, repairs, insurance, license plates, etc.” on line 9.
Standard Mileage Rate
You multiply business miles by the IRS rate. Publication 463 says that with this method you can’t deduct depreciation, repairs, gas, oil, “insurance, or vehicle registration fees.” Business parking and tolls are still deductible.
| Miles driven | Business rate |
|---|---|
| 2025 | 70 cents per mile |
| 2026, Jan. 1 to June 30 | 72.5 cents per mile |
| 2026, July 1 to Dec. 31 | 76 cents per mile |
The IRS raised the 2026 rate from July 1 in Announcement 2026-11, citing “recent increases in the price of fuel,” and its standard mileage rates page lists each year.
For a car you own, you must choose the standard rate “in the first year the car is available for use in your business,” and after that you can switch each year. A leased car on the standard rate stays on it for the whole lease. Fleets of five or more cars, and cars with a section 179 deduction or certain other depreciation, can’t use it.
Example: Splitting a Premium by Business Use
Hypothetical example: a self-employed photographer drives 15,000 miles in 2025, 9,000 of them for business, so her business use is 60%. Her car insurance costs $1,800 for the year.
- Actual expenses: $1,080 of the premium (60% of $1,800) counts, along with 60% of her gas, repairs, depreciation and other car costs.
- Standard mileage rate: 9,000 miles times 70 cents is $6,300, plus business parking and tolls. She can’t add the $1,080, because insurance is already part of the rate.
Which method wins depends on her total car costs.
Rideshare and Delivery Drivers
The IRS lists driving “a car for booked rides or deliveries” on its gig work page. Independent contractors report on Schedule C and use the same two methods. Employee gig workers fall under the rules below. A mileage log backs up your business percentage, and Publication 463, chapter 5, covers records.
If you’ve added rideshare coverage to your policy (see how GEICO handles rideshare insurance), IRS car expense guidance doesn’t address that endorsement separately.
W-2 Employees and the IRS Exceptions
IRS Notice 2025-5 says the Tax Cuts and Jobs Act suspended miscellaneous itemized deductions, “including unreimbursed employee travel expenses,” for tax years 2018 through 2025. Notice 2026-10 says section 70110 of the One Big Beautiful Bill Act “made permanent” that disallowance.
So for 2026 and later, most employees can’t deduct insurance on a car used for work. Employer mileage reimbursement is the practical alternative.
The 2025 Form 2106 instructions name the groups that can still deduct these costs, on Schedule 1 (Form 1040), line 12:
- Armed Forces reservists, for travel more than 100 miles from home for reserve service. Car costs are limited to the standard mileage rate plus parking, ferry fees and tolls.
- Qualified performing artists who meet IRS tests, including 2025 adjusted gross income of $16,000 or less before those expenses.
- Fee-basis officials, meaning state or local government officials paid on a fee basis.
Notice 2026-10 says these groups “may continue to use the business standard mileage rate.” Form 2106 also covers employees with impairment-related work expenses, which go on Schedule A.
Before You File
Keep your mileage log, declarations page and premium bills with your tax records to show your business-use percentage and what you paid. RateFrog’s car insurance guides cover the policy side.
RateFrog isn’t a tax advisor. This guide summarizes federal IRS rules, so check with a tax professional about your own return.
If the premium itself is the problem, you can compare car insurance quotes, which are estimates until an insurer issues a policy.
Frequently Asked Questions
Does the New Car Loan Interest Deduction Cover Insurance?
No, it’s for loan interest. The IRS fact sheet says that for 2025 through 2028, you can deduct up to $10,000 a year of interest on a loan taken out after 2024 for a new, U.S.-assembled personal vehicle, with income limits.
I’m a Teacher. Can I Deduct Driving for Work?
Possibly. Notice 2026-10 says eligible educators are “entitled to deduct certain unreimbursed employee travel expenses” up to the educator expense limit, and that for 2026 they may be able to itemize them instead. Topic 458 defines eligible educators as K-12 teachers, instructors, counselors, principals and aides who work at least 900 hours a school year. Commuting still doesn’t count.
Do State Tax Returns Follow the Same Rules?
Not necessarily. This guide covers federal rules only, and states set their own income tax rules, so check your state tax agency’s instructions.
Sources
- IRS Publication 463 (2025), Travel, Gift, and Car Expenses
- IRS Topic 510: Business Use of Car
- IRS: Instructions for Schedule C (Form 1040) (2025)
- IRS: Standard Mileage Rates
- IRS Notice 2026-10: 2026 Standard Mileage Rates (PDF)
- IRS Internal Revenue Bulletin 2026-29 (Announcement 2026-11)
- IRS Notice 2025-5: 2025 Standard Mileage Rates (PDF)
- IRS: Instructions for Form 2106 (2025)
- IRS: Manage Taxes for Your Gig Work
- IRS Publication 502 (2025), Medical and Dental Expenses
- IRS Publication 526 (2025), Charitable Contributions
- IRS: Tax Deductions for Working Americans and Seniors (Fact Sheet)
- IRS Topic 458: Educator Expense Deduction