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 fully tax deductible? ›
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.
How is business insurance claim tax treated? ›
Business Insurance Proceeds and Taxes
Generally speaking, moneys that businesses collect from their insurance companies after filing a claim are not considered taxable income – particularly if the amount you receive is $5,000 or less.
How much can a business write off for health insurance? ›
You may qualify for the Small Business Health Care Tax Credit that could be worth up to 50% of the costs you pay for your employees' premiums (35% for non-profit employers).
Can I deduct my insurance premiums on my taxes? ›
If you paid the premiums for a policy you obtained yourself, your health insurance premium is deductible when they are out-of-pocket costs. If your insurance is through your employer, you can only deduct these: Amounts you paid with after-tax funds.
Are business expenses 100% tax-deductible? ›
Office equipment, such as computers, printers and scanners are 100 percent deductible. Business travel and its associated costs, like car rentals, hotels, etc. is 100 percent deductible. Gifts to clients and employees are 100 percent deductible, up to $25 per person per year.
How much business deductions can I claim? ›
As a result of the Tax Cuts and Jobs Act of 2017, eligible businesses can deduct up to 20% of their qualified business income on your taxes. However, the qualified business income (QBI) deduction has limitations based on your trade or business, as well as how much you earn.
Can an LLC write off health insurance premiums? ›
For non-member employees – An LLC can deduct the cost of medical insurance for all employees who are not members of the LLC. This deduction can also include the amount the LLC pays for employees to have qualified long-term health coverage.
Can an S Corp owner deduct health insurance premiums? ›
You may be able to use the Self-Employed Health Insurance (SEHI) deduction if you're at least a 2% shareholder in an S Corporation. To claim this deduction, the health insurance premiums must be paid or reimbursed by the S corporation and reported as taxable compensation in box 1 of your W-2.
Is it worth claiming medical expenses on taxes? ›
Normally, you should only claim the medical expenses deduction if your itemized deductions are greater than your Standard Deduction (TurboTax can also do this calculation for you). If you elect to itemize, you must use IRS Form 1040 to file your taxes and attach Schedule A.
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.
Do insurance premiums go towards deductible? ›
No, your premium does not go towards your deductible, and it doesn't count for your out-of-pocket maximum (the most you'll pay for care each year). But deductibles and premiums flow into one another. They have an inverse relationship. When one is more affordable, the other tends to be more expensive.
Can a business owner deduct medical expenses? ›
You can deduct on Schedule A (Form 1040) only the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income (AGI). This publication also explains how to treat impairment-related work expenses and health insurance premiums if you are self-employed.
Does business income coverage have a deductible? ›
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 insurance for a business taxable? ›
As long as the reimbursem*nt you get from filing an insurance claim does not surpass the value of the loss, insurance proceeds are not taxable to a business. Casualty loss insurance proceeds for business property damage are not taxable either.
What is the deductible for a business owner policy? ›
A deductible is the amount of money you're required to pay out of pocket before your insurance policy applies coverage. In other words, it's the amount of money a small business is responsible to pay for any claim submitted. The insurance carrier covers the remaining amount owed.
Can a business deduct whole life insurance premiums? ›
Life insurance premiums are not tax-deductible for most people. If you're a business owner and premiums for your employees are a business expense, they may be deductible. Life insurance payouts are typically not taxed, though if the deceased person's overall estate is very large they may be subject to estate tax.
