If you own a business, you’re going to be looking for every tax deduction possible. Various types of insurance are essential for a business and the premiums can be expensive. One of the most frequently asked questions by business owners is “Are insurance premiums tax deductible?” The short answer is yes, but there are some that can’t be deducted.
According to the Internal Revenue Service, the costs that companies incur to conduct business are tax deductible. That provides an opportunity for substantial savings on income taxes. A wide variety of insurance costs can be deducted that include:
- Commercial property insurance for losses due to accidents, fire, theft, and storms
- Credit insurance to cover losses for bad debts
- Employee medical/hospitalization
- Omissions and errors
- Workers’ Compensation
- State unemployment insurance fund
- Auto insurance for company vehicles
- Employee life insurance
- Business interruption
There are also premiums paid by a partnership and S corporations that can be deducted. Be aware that there are also some limitations and insurance costs that can’t be deducted. When an auto is used for business and personal use, only the portion of usage related to business can be deducted.
Insurance costs that can’t be deducted include policies that pay for earnings lost due to illness or disability, self-insured reserve fund, key person insurance, corporate-owned life insurance, and life insurance paid on loans. Premiums paid in advance are also ineligible as a deduction,
The laws governing business taxes are highly complex and complicated. There are deductions that can be claimed in some instances when specific conditions apply, but not in others. Some types of insurance expenses apply specifically to self-employed business owners.
Tax laws change each year and expenses that are deductible this year may not be next year. It’s essential that business owners have a professional specializing in business taxes do their returns each year. The tax professionals will be well-versed in the deductions that apply to each business.
For more information about how The Sena Group can help you with any
of your insurance needs, please contact us at 561-391-4661.
We can be found on Social Media at the following links.