And, in general, yes, business insurance is tax deductible. For example, if you run a for-profit business, your business expenses, including insurance, can be deducted from your taxable income if they are both ordinary and necessary. An ordinary business expense is common and accepted in your business or industry. Generally speaking, you can deduct your insurance premiums if those policies benefit the company and serve a business purpose.
However, you may encounter a gray area if you are a sole proprietor who wants to deduct health insurance premiums. In some situations, you may not be able to do so. Expenses can add up quickly when you're a business owner, but taking advantage of tax deductions can help you save. You can legally deduct many business-related expenses from your taxes, including certain insurance premiums.
Commercial auto insurance is tax-deductible in most cases. However, it will generally only apply if the company uses the car as a component of its operations. For example, the car you drive to work is not necessarily a tax deduction. On the other hand, the insurance you pay to cover your company's fleet of delivery trucks may be.
When you're self-employed and your company offers group insurance to employees, you can't deduct the cost of premiums that benefit you personally (which actually pay your own policy). Insurance premiums are deductible if they are an ordinary expense (common and accepted) in your type of business and are a necessary expense (appropriate and useful for your company). You maintain commercial property insurance to protect your business from losses due to theft and damage to your inventory. If you suffer an accidental loss, but your insurance doesn't offer any coverage, your company can deduct 100% of the loss from the company's income.
One type of insurance premium that is not deductible is life insurance premiums if the premium is paid on behalf of an owner, employee, or anyone with a financial interest in the business. KIA and KeyBank are independent entities, and when you buy or sell insurance products, you do business with KIA and not with KeyBank. If some of your health insurance premiums don't qualify for the self-insurance deduction, you may still be able to deduct them in Schedule A of your Form 1040, provided that you detail and meet all other requirements. This policy covers legal expenses when your company is sued for third-party bodily injury to your property, property damage caused by your company, and advertising injuries.
It's usually part of your property insurance policy and covers lost profits when your business closes due to a fire, windstorm, or other covered event. When the IRS says you can deduct any premiums that are needed, it doesn't mean you can only deduct the insurance legally required to operate your business. TIP: If you want your own health insurance premiums to be deductible for your company, hire your spouse as an employee and ask them to select a family insurance plan that covers you. Since the IRS considers business insurance to be a cost of doing business, your policy premiums can be deducted from your taxable income.
Your small business is likely paying significant amounts as premiums for your insurance, but the good news is that you can deduct those premiums from your business taxes. Also called error and omission insurance or malpractice insurance, this policy covers your company's alleged professional negligence lawsuits. How you report your expenses, including insurance premiums, varies depending on the structure of your business. For a small business owner, this can be a key benefit of having an insurance policy beyond simply protecting their assets.