Make this tax season a little less stressful by learning what you could potentially deduct when it comes to your business insurance.
The IRS generally considers business insurance a cost of doing business, so your policy premiums may be deductible from your taxable income. A tax professional can ensure you fill out the proper paperwork to ensure you are taking advantage of all deductions available to you.
Here are a few worksheets that can help calculate your deductions:
What Could be Tax Deductible?
Below are some common types of commercial insurance that could be tax-deductible on a corporate tax return.
General Liability Insurance- This common business insurance policy covers legal expenses when your business is sued over claims involving bodily injuries on your property, property damage your business causes, and advertising injuries.
Professional Liability Insurance- Also known as errors and omissions (E&O) insurance or malpractice insurance. This policy protects a company against liability incurred as a result of negligence in performing your professional services.
Commercial Property Insurance- This coverage reimburses the business owner for the cost of repairing or replacing damaged or lost property, such as inventory or equipment due to a covered cause of loss such as fire, windstorm, and more.
Business Interruption Insurance- This covers your lost profits, operating expenses, relocation costs, and payroll when your business cannot function normally, or is shut down because of a covered cause of loss.
Cyber Liability Insurance- Third-party cyber liability policies cover lawsuit fees and losses when your business is responsible for someone else’s data breach and resulting losses.
Workers’ Compensation Insurance- In most states, employers are required to carry a certain amount of workers’ comp coverage for their employees. This pays your employees’ medical expenses and lost wages if they’ve been injured on the job.
Commercial Auto Insurance- This policy covers liability and property damages resulting from accidents in business-owned vehicles. Note: You could have to choose between this deduction and mileage deduction.
Unemployment Insurance- You could potentially deduct the amount you contribute to a state fund.
Health Insurance- If your business has employees and you pay a portion of their health insurance premiums, then these amounts could potentially be deducted as an employee benefit program expense.
What Is Usually Not Tax Deductible?
- What you pay into a self-insured reserve.
- Premiums on a disability policy that covers your lost income.
- Premiums for loan protection insurance.
Pioneer and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Insurance services are offered through Pioneer Insurance Agency Inc., a wholly owned subsidiary of Pioneer Bank, National Association.
| Not FDIC Insured. | Not Bank Guaranteed. | Not a Bank Deposit. | Not Insured by any Government Agency. | May Go Down in Value. |
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FAQs
In most cases, the answer to the question “Is business insurance tax deductible?” is yes. However, consulting with a tax professional or accountant is important to fully understand how different types of business insurance can impact your taxes.
Is business insurance 100% tax deductible? ›
Since the IRS considers business insurance a cost of doing business, your policy premiums can be deducted from your taxable income. You'll have to fill out some forms to take advantage of the deduction.
How does a deductible work for business insurance? ›
Most business insurance policies have a deductible. For example, if your deductible is $500 and you have a claim for $1500 in damages, the insurance company will pay you $1,000 after considering your $500 deductible.
How much can a business write off for health insurance? ›
The health insurance premium deduction can't exceed the earned income you collect from your business. If you have a business and you pay health insurance premiums for your employees, these amounts are deductible as employee benefit program expenses.
How much business deductions can I claim? ›
Section 179 deduction: Business owners can deduct up to $1,160,000 of property placed in service during that same tax year with a Section 179 deduction. While you can't claim this deduction if it creates a net loss on your business tax return, you can carry any unused Section 179 deductions to next year's return.
Can you deduct 100% of business expenses? ›
Some business expenses may be fully deductible while others are only partially deductible. Below are some examples of fully deductible expenses: Advertising and marketing expenses. Processing fees from business and corporate credit cards.
Are insurance premiums 100% tax-deductible? ›
In order to deduct medical expenses, including health insurance, from your taxes, your total medical costs must exceed 7.5% of your adjusted gross income (AGI) — and you can only deduct the amount above that 7.5%.
Can I write off car insurance as a business expense? ›
Generally, you need to use your vehicle for business-related reasons (other than as an employee) to deduct part of your car insurance premiums as a business expense. Self-employed individuals who use their car for business purposes frequently deduct their car insurance premiums.
Is it better to have a $500 deductible or $1000? ›
If you're more likely to get into an accident, you won't want to pay out a higher deductible. However, if you're generally a safer driver, your car insurance premiums will be lower with a $1,000 deductible.
What is not deductible for a business? ›
Non-deductible business expenses are those that are not directly related to your business. This includes things like meals and entertainment, car payments, and home office deductions. While these expenses may be necessary for your business, they cannot be written off on your taxes.
Overall, self-employed LLC members can usually deduct health insurance as a business expense.
What is tax deductible for LLC? ›
Tax deductions
The IRS allows LLCs to deduct initial start-up costs — e.g., marketing materials, travel, permits, legal fees, research — and thereafter allows deductions for a wide variety of operational costs, including: Computers, printers, and other office supplies. Phone and internet. Website development.
Are glasses tax deductible for self-employed? ›
Some common medical expenses include blood pressure monitors and prescription glasses. Insurance copays and deductibles also qualify. The IRS provides a full list of qualified medical and dental expenses that anyone can deduct, including self-employed individuals, if they meet certain requirements.
Will I get a tax refund if my business loses money? ›
If you open a company in the US, you'll have to pay business taxes. Getting a refund is possible if your business loses money. However, if your business has what is classified as an extraordinary loss, you could even get a refund for all or part of your tax liabilities from the previous year.
Can I claim my internet bill as a business expense? ›
The internet makes it possible for you to run your own business, and without it, your business wouldn't exist. You can deduct internet costs if you work from home or regularly do business online. Running a business online can include: Acquiring new business or customers through various platforms.
What deduction can I claim without receipts? ›
What does the IRS allow you to deduct (or “write off”) without receipts?
- Self-employment taxes. ...
- Home office expenses. ...
- Self-employed health insurance premiums. ...
- Self-employed retirement plan contributions. ...
- Vehicle expenses. ...
- Cell phone expenses.
The IRS won't deduct 100% of your transportation costs unless the trip is primarily for business and lasts longer than an ordinary day's work. Being longer than an ordinary day's work. You can't write off expenses from a day trip. If your trip involves an overnight stay, then the travel qualifies for a deduction.
Is there a deductible for business income coverage? ›
Does Business Income Coverage Have a Deductible? In most cases, business income coverage doesn't have a monetary deductible. However, there is sometimes a time deductible. Some insurers may have a waiting period up to 72 hours after the covered loss occurs before coverage starts.
Is business equipment 100% deductible? ›
However, any unused Section 179 deduction can be carried forward and deducted on next year's return. Bonus depreciation. Businesses can take advantage of bonus depreciation to deduct 100% of the cost of machinery, equipment, computers, appliances, and furniture.
Is health insurance a business expense for an LLC? ›
Overall, self-employed LLC members can usually deduct health insurance as a business expense.
