Is Your Business Insurance Premium Tax Deductible?
As you’re growing your business, understanding your insurance is important. A lot of business owners have a question, however. Are the premiums you’re paying for a business insurance policy tax-deductible?
In short: Yes, business insurance premiums are often tax-deductible. In general, the IRS lets businesses deduct their operational costs from their income. If you’re about to calculate your taxes, consider your insurance premiums to be a business cost. Hold on, though, because this answer is more than it seems.
Understanding Business Costs
Business costs are usually tax-deductible. This deduction can help businesses, giving them significant tax savings. This means increasing the money you can put into the business. As a business owner, though, you should be careful when handling your IRS tax forms.
In recent years, the IRS has become aware of different tax avoidance schemes. Tax cheaters have made the tax-filing process difficult to manage. If you want to avoid trouble with the IRS, you should hire a qualified tax professional. Tell the professional to prepare your business’ returns. This professional will make sure your premium deductions are correct. They’ll also make sure you’ve calculated your deductions correctly.
What Premiums Can You Deduct?
You can deduct any expense which is an ordinary and necessary cost of insurance. As long as these expenses are for business, a trade or your profession, you can usually write them off to the IRS. Also, any premiums you’ve paid for group insurance are deductible. This said, these premiums need to cover an insurance plan which covers the following:
This will work as long as the policy is in your business’s name. Generally, premiums paid for a single person’s insurance aren’t deductible. You can check out the IRS’s list of accepted premium deductions here.
Be careful, however, because you won’t be able to deduct some insurance premiums. Amounts paid to establish a self-insured reserve, for example, can’t count. You also can’t deduct some life insurance, annuities and other premiums paid on your insurance to get a loan.
If you have any questions, contact your provider. The IRS issues advisory opinions circulars which define and revise specific deductions. It’s a good idea to be well-read on these circulars. Consult your tax professional if you want to deduct premiums. Then, make sure your long-term care policy, life insurance policy and health insurance policy are correct.