We can insure just about anything – houses, cars, boats, businesses, ability to work, and even our lives. While coverage may be costly, we are paying for peace of mind. And the only thing more expensive than insurance is not having it when faced with a lawsuit or property loss. Fortunately, business insurance premiums are often tax-deductible expenses.
Small Business Insurance is Tax-Deductible
Most companies must carry some form of business coverage per industry regulations, leases, or client contracts. Therefore, if you are operating a for-profit company and your insurance policy is ordinary and necessary, it is a tax-deductible business expense. Typically, you can write off business-related insurance premiums along with other business expenses, which reduces your taxable income and self-employment tax. For this reason, you can write off the following business coverages:
- General Liability
- Workers’ Compensation
- Commercial Property
- Commercial Auto
- Cyber Crime
- Professional Liability
- Business Interruption
Based on your policies, you can deduct your premiums for fire, flood, storm, theft, liability, and other coverages on business assets. For example, if your company shut down due to a fire and your business interruption insurance paid for lost profits, this can be deducted.
Additionally, you may be able to adjust your self-employed health insurance premiums. To qualify, you must be self-employed and have a net profit for the year.
And remember, you can only deduct the premiums that cover this year on your current tax return.
Non-Deductible Insurance Expenses
Not every business insurance premium can be considered a tax-deductible expense. If the insurance policy is not ordinary and necessary, the IRS will not consider it a write-off. For example, insurance premiums that help cover the earnings lost due to a disability or a life insurance policy are not tax-deductible. Additionally, the amount you pay to set up a self-insured reserve or help secure a loan will not be considered a tax-deductible business expense.
For a complete list of tax-deductible insurance expenses, review the IRS guidelines.
Seek the Professionals
Sometimes, it is not always clear what insurance policies may be tax-deductible. Although several business insurances are tax-deductible, nothing is set in stone. Consider speaking to your tax advisor or insurance agent about your financial situation.
Looking for a better Small Business Insurance Policy? Get a Quote through DRS Insurance Group.
CONnect with us
DRS Insurance Group is an independent insurance agency located in Indialantic, Florida. Our team is here to help you with a quote, analyze your current coverage, and answer any questions you have.