How to Rev Up Your Tax Return: Car-Related Tax Deductions

Good news. This year, we’ve been granted a 3-day reprieve on our taxes. Since Washington, D.C., will be celebrating Emancipation Day on April 15, the tax deadline’s been moved forward one business day. And because the 15th happens to fall on a Friday, we’ll actually have until Monday, April 18, to drag our feet, er … file our taxes.

Whether you’re a DIY master or a regular customer at your local accounting firm, chances are you want to get the most out of your tax returns. IRS regulations can be complicated, however, and it’s not always clear what you can and can’t deduct.

To help you figure it all out, we spoke with Gail Rosen, a certified public accountant with more than 30 years of experience. Here are the top 4 car-related deductions:

1. Tax deductions for business use

If you use your vehicle for business purposes, charity, or medical reasons, you can deduct your driving-related expenses using either of these methods:

  • Standard mileage rate. To compute your deductions using 2010’s standard mileage rate, multiply the number of business miles traveled by 50 cents (charity is 14 cents and medical is 16.5 cents) per mile. Your car insurance expenses are factored into the standard mileage rate. Keep in mind that if you deduct using the standard mileage rate, you can’t deduct your vehicle expenses — including depreciation, lease payments, gas, maintenance costs, insurance, or registration fees — for that year.
  • Actual car expenses. Unlike the standard mileage rate, this method of deduction takes into account all of the expenses associated with your car (gas, car insurance, car payments, repairs, etc.). In this method, you add up all of your vehicle expenses related to business use and multiply that number by the business percentage (business miles for the year/total miles for the year).

The tax regulations on this can be tricky, so be sure to visit the IRS website’s section on car expenses or your local tax professional for more information.

2. Tax deductions for donating a car

If you donated a car to a qualified charitable organization last year, you could be eligible for a tax deduction.

If the donated car is worth more than $500, the deduction will be the amount for which the charity actually sells the car without materially improving it. Your tax bracket will also determine how much you get back. For example, if you donate a car and it sells for $4,000, your deduction will be determined by multiplying that amount by your tax bracket (25 percent, 30 percent, etc.).

Some quick tips to keep in mind:

  • Check the value of your vehicle before donating
  • Make sure that the charity is eligible to receive tax-deductible donations
  • Be sure to itemize deductions on Schedule A of Form 1040

3. Tax credit for hybrids

Owning a hybrid provides many benefits, one of which is a tax credit from Uncle Sam. If you bought (or put into use) a new, qualified hybrid on or after January 1, 2006, you could receive up to $3,400 in income tax credit from the government. The dollar amount varies depending on the date of purchase as well as the make, model, and year of your car.

To qualify, these requirements must be met:

  • The car must be put to use after December 31, 2005
  • The car must be purchased on or before December 31, 2010
  • You must be the original buyer of a new hybrid (the credit does not apply to used hybrid vehicles)
  • The car must be driven predominantly in the U.S.

The tax credit for hybrids expired on December 31, 2010, however, so this tax season will be your last chance to claim the credit.

4. Tax credit for EVs

2010 was the year of the EV. Owners of EVs purchased on or after 2010 qualify for a federal income tax credit up to $7,500. The credit amount will vary depending on the capacity of the battery in the vehicle.

To qualify, these requirements must be met:

  • The vehicle must be new
  • The vehicle has to be certifiably electric
  • The vehicle was acquired for use (not for resale)
  • The vehicle must be placed into use during or after 2010
  • The vehicle must be used predominantly in the U.S.

If you’ve already filed your taxes this year, then bravo. If not, you have until April 18 to make the most of 2010 and qualify for as many deductions as you can.

Good luck and (many) happy returns.

Additional resources

Search for eligible charities
Get the guide to vehicle donation
Get the scoop on the hybrid tax credit
Get the scoop on the EV tax credit

Android Phone Traffic (Infographic)

Remember when phones were for talking? Over the past couple of decades, rotary dials, operators, pay phones, and collect calls have all gone the way of the Commodore and made way for phones that text, store music, surf the Web, and find out when the next bus arrives.

To that end, mobile traffic to esurance.com has increased around 6 times since last year, paced primarily by Android™ OS phones.

Android infographic vertical

As our smartphones get smarter and mobile browsing gets easier and more intuitive, we expect these trends to continue. That’s why we’re bringing most of our car insurance features to the phones. Esurance Mobile for Android lets you get a quote, see repair pics, and take care of business in between.

If you’re one of the millions of Android-phone owners and you’re interested in Esurance or already a customer, download Esurance Mobile for Android.

* Information based on mobile web traffic to esurance.com from November 2009 to November 2010.
** Information based on mobile web traffic to esurance.com from the first quarter of 2011.
(c) 2011 Esurance. The data and artwork compiled in this graphic provided by Esurance Analytics.

Esurance, the Warriors, and NBA Green Week

For the 3rd year in a row, Esurance is proud to support NBA Green Week with our partners, the Golden State Warriors. In years past, Esurance associates teamed up with Warriors staff, players, and the Warriors Girls to plant trees in Oakland.

But with gas prices on the rise this year, we decided to turn our efforts to carpooling and the use of public transportation. So in honor of NBA Green Week, Warriors players Stephen Curry and Ekpe Udoh joined Esurance CEO Gary Tolman and VP of Marketing Darren Howard at a Bay Area Rapid Transit (BART) station near our San Francisco headquarters. Along with volunteers from both the Warriors and Esurance, the “green mob” surprised unsuspecting commuters with free BART cards and game tickets!

Check out the Green Mob in action:

Green Night “is a reminder of the small things we can all do to help make a collective difference for the environment,” said Esurance President and CEO Gary Tolman.

This Earth Month, Esurance would like to encourage you to green your commute by taking public transit or carpooling. Plus, you never know who you might run into!

Gadget-Driven: Vehicle Safety Meets Cool Technology

As our worlds become more and more high-tech, so do our expectations for our vehicles. In fact, many of us now rank technology over safety when shopping for a new car. As an insurance company, the idea of so many nifty gadgets distracting drivers from the road makes us twitch a little. But as an online innovator with roots in the dot-com era, the opportunity for technology to advance vehicle safety makes our actuarial hearts go pitter-patter.

Here are a few of the safety technologies we’re most excited about:

Tailgate prevention

Ford is currently developing “intelligent vehicle” technology, part of which is designed to warn you if you’re traveling too close to the car in front of you. According to an NPR report, “The technology enables cars in close proximity to one another to share information wirelessly. The premise behind it is that most crashes are avoidable if drivers have enough time to react.”

Using GPS and Wi-Fi, intelligent vehicles will be able to talk to each other (within 1,500 feet), communicating things like latitude, longitude, and speed.

Blind Spot Detection

Like its name implies, Blind Spot Detection (BSD) technology uses sensors to detect if there’s a vehicle in your car’s blind spots. It then alerts you using lights in the mirrors or audible alarms.

Already available in certain Audi, Buick, Cadillac, Mazda, Mercedes-Benz, and Volvo models, Business Wire reports that BSD systems could be in 25% of new cars by 2016.

Collision Warning Systems

According to the U.S. Department of Transportation, Collision Warning Systems (CWS) “use algorithms to interpret transmitted and received radar signals to determine distance, azimuth, and relative speed between the host vehicle with the CWS and the vehicle or object ahead of it in the lane.”

Simply put (for those of us who don’t have advanced engineering degrees), CWS warns drivers if an object is approaching too quickly. Some systems will even apply the brakes if imminent threat of collision is detected.

Vehicle apps

In addition to built-in safety devices, many manufacturers are also developing vehicle-specific apps for smartphones. GM’s OnStar app enables you to control your vehicle remotely (can’t remember if you locked the car?), access info like fuel levels and tire pressure, and track average miles per gallon. It even recommends oil changes.

Similarly, the Nissan LEAF™ app lets you begin charging your battery, see when a charge is complete, check estimated driving range, and turn the climate control system on or off.

Good driving reigns

While all of this technology may one day deliver an accident-proof car, the best way to avoid collisions in the meantime is to stick with good old-fashioned safe driving. Check out these 7 Tips for Good Driving, and be your own safety device.

Know of any cutting-edge technological advancements for cars? Let us know.

Related links

Find out about some pretty cool new innovations from Ford
Just how do Google’s driverless cars get around?

How to Avoid Being April’s Fool: Car Insurance Fraud

Everyone knows April Fools’ Day is good for a few laughs, but nobody knows its true origins. Some historians attribute the day of foolish jokes to the adoption of the Gregorian calendar in France, while others link April 1st to springtime “renewal” festivals in which pranks happily disrupted everyday social order.

At Esurance, we love a good laugh as much as anyone, but some “pranks” (like car insurance fraud) are no laughing matter. After all, fraud not only affects insurance companies, it affects us as individuals as well. In fact, the FBI estimates that the average family pays $400 to $700 more on insurance premiums due to fraud.

To help you fight back (and keep premiums low), we break down some common scams and provide tips on how you can avoid them.

The fault with no-fault

“No-fault insurance” (also known as personal injury protection or PIP) is an insurance program that allows policyholders to receive payment for damages, medical coverage, and lost wages in the event of an accident, regardless of fault.

Unfortunately, no-fault insurance laws also make it easy for scammers to defraud the system by falsifying records and inflating medical bills, injuries, and collision damages. Among the 12 no-fault insurance states, Florida and New York top the Insurance Information Institute’s list of no-fault states with questionable claims. So it should come as no surprise that Florida and New York have also garnered attention for needing insurance reform as well as for rising premiums caused by fraud.

In these states and elsewhere, some of the most common scams are staged accidents. Organized rings often work together to orchestrate an accident and then inflate medical injuries and property damage.

The scams

So what are their tactics, and how exactly do they “stage” accidents? The Coalition Against Insurance Fraud offered up a few common ploys.

  • The swoop and squat: In this scenario, a car will suddenly pull in front of you and immediately brake to cause a rear-end collision. Sometimes, an accessory to the crime will drive alongside you in the right or left lane to stop you from swerving out of the way. The driver and passengers will then proceed to file large injury and collision claims against your insurance company.
  • The jump in: In this scenario, fraudsters will fabricate more victims during the claims process, asserting that there were more passengers in the car. And not surprisingly these fictitious victims have copious injuries, too.
  • The helper: In this scenario, a “Good Samaritan” will appear at the scene of an accident (often caused by a cohort) and offer to help. This person will provide the numbers to a doctor, a repair shop, and a lawyer. Be careful here. The repair shop could purposefully inflate your repair bill, the doctor could misrepresent your injuries and medical treatments, and the lawyer might provide untrustworthy or dishonest advice.

How you can fight back

You can outsmart the fraudsters through a few precautionary measures:

  • Be aware of your surroundings. Keep your eyes on the road, check your mirrors, and watch out for cars “pacing” (following) yours or stopping for no apparent reason.
  • Notify the authorities. Always call the police when an accident occurs, especially if you have concerns about the accident, other drivers or passengers, or if someone has injuries (no matter how minor). Contacting the police, even if an officer can’t show up to the accident scene, will lead to an official record of the incident. The report will come in handy when fraudsters try to fabricate excess damage and injuries.
  • Have the right equipment. Cell phones with built-in cameras are standard issue these days — and useful in collisions. A camera phone allows you to document damage at the scene and call for the police and medical attention, if needed. (If you don’t have a phone with a built-in digital camera, carry a disposable camera in your glove box.)
  • Gather info. Obtain the full names, addresses, and phone numbers of all parties involved (including all witnesses), as well as the license plate number(s), the vehicle model(s), and insurance information. You may also want to document where people were seated in the vehicle(s) when the accident occurred. The more information you can provide to your insurance company, the better. By being aware of fraudsters’ tricks and the ways you can beat them, you can ensure that no matter what day of the year it is, the joke will not be on you.

Additional resources

Discover the history of April Fools’ Day
Learn how Esurance fights fraud
Learn how to avoid claims bandits
See staged accident videos