As a business owner you might be thinking about insurance and whether the cost could be deductible for IRS tax purposes. This guide explains which insurance types are deductible. Reducing your taxes can offset some of the cost of the insurance, making it more affordable. Deductible and non-deductible insurance is detailed in IRS publication 535: Business Expenses and summarized below.
General note: This blog post may not cover all types of insurances you can purchase. Insurance companies and brokers can provide additional information about types of insurance polices you can purchase for yourself or your business. Consult your tax professional to confirm a particular insurance premium is deductible in your situation.
Let’s start with what is not deductible.
The IRS Publication 535 states that you cannot deduct premiums on the following kinds of insurance.
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Self-insurance reserve funds, including money you set aside because you can’t or didn’t purchase insurance for an anticipated loss.
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Loss of earnings, including a policy that pays for lost earnings due to sickness or disability.
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Certain life insurance and annuities, including policies that provide a benefit to the owner(s) of the business.
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Insurance to secure a loan, including a policy to cover the owner(s) life or the life of another person with a financial interest in the business, or to get or protect a business loan.
Fortunately, there are many types of insurance premiums you can deduct.
You can deduct premiums for the following types of insurance:
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Insurance that covers fire, storm, theft, accident, or similar losses.
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Credit insurance that covers losses from business bad debts.
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Group hospitalization and medical insurance for employees, including long-term care insurance. Note: benefits for partnership owners are generally recorded as guaranteed payments, benefits for S-Corp…