Deduct Business Insurance Premiums

Category : Insurance

Since having insurance is a "ordinary and necessary" part of doing business, you can usually deduct the premiums for business insurance from income. Some of the rules around insurance deductions can be confusing, however.

Create a breakdown of all of the business insurance you carry.
This breakdown should include how much you pay in annual premiums. Having information on all of your applicable insurance premiums makes calculations simpler.

Record all qualifying insurance premiums in your breakdown.

These may include property insurance that covers theft and damage to business assets, credit insurance, group medical insurance, liability insurance, malpractice insurance, worker's compensation insurance, overhead insurance, automobile insurance for business-related vehicles, business interruption insurance, life insurance and state unemployment insurance contributions.

Exclude insurance premiums that do not qualify for tax deduction.

These may include self-insurance, loss-of-earnings insurance, life insurance where you are directly or indirectly a beneficiary and insurance taken out to secure a loan.

Calculate the total you pay in annual premiums for qualified business insurance paid in the taxable year.

You cannot deduct insurance premiums prepaid for years to come. For example, if you purchase a multi-year insurance policy and pay the premium upfront, you can only deduct the portion of that payment that went towards the premium for the taxable year.