Streetsmart insurance Blog
The Internal Revenue Service (IRS) states that a business expense can qualify as a tax deduction when it is ‘ordinary’ and ‘necessary’. An ‘ordinary’ expense should be a common expenditure in your line of work, and a ‘necessary’ expense should be appropriate for your small business. If any of your business expenses meet those two qualifications, they are tax deductible.
For decades, business owners have taken advantage of this deduction by submitting the cost of their merchandise, equipment, and employee salaries to the IRS. Over time, tax professionals realized that insurance policies are an ordinary and necessary expense for business owners who are serious about protecting their assets. The IRS now recognizes the importance of business insurance, and most policies can qualify as tax deductible expense.
How Can I Take Advantage Of This Tax Deduction?
Make Sure That Your Policy Is Eligible – If you want to write off your insurance premiums, you need to make sure that your business insurance policy is an ordinary and necessary expense. Some business insurance policies are mandated under state and/or federal law (workers’ compensation insurance, commercial auto insurance, and commercial property insurance) and will meet those standards. Some insurance policies are used by other professionals in your industry (BOP, credit insurance, liability insurance, and malpractice insurance) and will also qualify for the deduction. Unfortunately, there are other insurance policies that have personal and professional benefits (life insurance, annuities, and personal disability insurance); those policies will not qualify for the federal tax deduction.
Keep All Of Your Policy Records – Hold on to your policy information, including your insurance contract and your monthly and/or annual receipts. These documents will help you fill out your tax return and protect you if the IRS performs an audit.
Talk With A Tax Professional – The IRS has multiple tax deductions for small business owners. Work with an experienced accountant to review your financial records, select the right deductions for your business, and prepare your federal and state tax returns.
Street Smart Insurance is committed to providing affordable coverage.Whether you are looking for your first business insurance policy or you are shopping for a better price, our agents are ready to help. Call us at 732-462-8343 for a free quote!