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
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.
Can I claim my business insurance on my taxes? ›
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.
What type of insurance is tax deductible? ›
Besides your health insurance premiums, other deductible medical expenses may include the following: Long-term care insurance premiums. Dental insurance premiums. Vision insurance premiums.
Does insurance count as a business expense? ›
Business insurance is an expense in your business. You can utilize expenses for tax deductions for your small business in many instances. According to the IRS: “To be deductible, a business expense must be both ordinary and necessary.” Not all insurance is classified as ordinary and necessary by the IRS — but many are.
What is business insurance deductible? ›
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 small business deduct health insurance premiums? ›
Like larger companies, small businesses are typically able to deduct some of their health insurance-related expenses from their federal business taxes. Expenses that might qualify for these deductions may include: Monthly premiums. Contributions to an HSA.
Is business insurance income taxable? ›
In many cases, your business insurance policy will reimburse your business for a given loss. Sometimes, though, you'll be only partially reimbursed or not compensated at all. In such cases, your business may be entitled to some tax relief. In general, a reasonable insurance reimbursem*nt is not taxable.
Can you write off car payments for LLC? ›
Yes, an LLC can write off a car purchase as long as it is used for business purposes. The exact amount of the deduction will depend on whether you use the standard mileage rate or the actual expense method.
What type of insurance has a deductible? ›
Property insurance deductibles
Homeowners deductibles and renters deductibles are similar to auto deductibles — you'll pay a deductible each time you file a claim (generally for claims filed under dwelling, other structures, and personal property coverage).
Can I claim my insurance premiums on my taxes? ›
You can include health insurance premiums in your medical expense calculations. However, certain premiums are not eligible for medical expense deductions. You cannot include the following premiums in your tax deductions: Life insurance policies.
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 my car payment tax-deductible? ›
It's natural for freelancers who use their cars to expect to claim a car tax write-off on their 1099 tax. But if you bought a car and are making monthly payments, or you're leasing a car, the payments are not actually tax-deductible.
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 is business insurance claim tax treated? ›
Business Insurance Proceeds
Casualty loss insurance proceeds for business property damage are not taxable either. If your insurance fails to cover the loss, you can likely deduct the loss against your business income.
Can you write off business car insurance? ›
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 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.
Can I claim business expenses on my taxes? ›
An expense that meets the definition of ordinary and necessary for business purposes can be expensed and, therefore, is tax-deductible. 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.
Is business overhead insurance tax-deductible? ›
And here's a perk: The premiums your company pays for BOE insurance are generally tax-deductible. While the benefit payments, on the other hand, are taxable, they are used to pay for overhead expenses which are typically tax-deductible.
