Business Insurance Expenses
What You May Deduct
You may deduct expenses for insurance premiums. Deductible business insurance premium expenses include:
- Casualty insurance (protection against property damage)
- General business liability insurance
- Professional liability and malpractice insurance
- Key person life insurance on company officers and executives
- Business interruption insurance
- Workers compensation insurance
- Insurance on business-owned vehicles
- Product liability insurance
- Performance bonds or fidelity bonds
What You May NOT Deduct for Business Insurance
- You may not deduct the cost of dues at golf clubs or country clubs for employees.
- You may not deduct the cost of life insurance for anyone associated with your company if you are the direct or indirect beneficiary.
- You may not deduct disability insurance premiums on yourself.
Where to Show these Expenses
- For sole proprietors and single-member LLCs, show these expenses in the "Expenses" section of Schedule C
- For partnerships and multiple-member LLCs, show these expenses in the "Deductions" section of Form 1065
- For corporations, show these expenses in the "Deductions" section of Form 1120.
Special Notes:
- You may not provide special benefits to "key employees" (the highest-paid employees or those serving as officers, for example) to the exclusion of other employees. In other words, you must offer the same benefits to all employees.
- Contributions to state unemployment insurance funds may be deductible if they are considered "taxes" under state law.
- If your business operates on a cash basis, you may only deduct insurance premium payments applicable to that year. For example, if you pay premiums in November 2007 for six months, you may only deduct the November and December 2007 portion of that premium on your 2007 business taxes. (Of course, the balance would be deductible on your 2008 business taxes.)
For More Information
See IRS Publication 15B for more information on specific employee benefits.Disclaimer
This article presents general information; I am not a tax attorney or tax preparation specialist. Refer to IRS publications and refer questions to your tax consultant.
