Business insurance can be completely deducted from your taxes! However, like any other tax deductions, it will need to meet certain requirements if it is to be considered. Business insurance must be both ordinary and necessary to your company’s operation. The large majority of modern businesses are required to carry some form of business insurance due to state laws, industry regulations, or required contracts.
Here is a list of example deductions below!
Data breach insurance
General liability insurance
Workers’ compensation insurance
Commercial real estate insurance
Professional liability insurance
You can earn 100 percent tax-deductible as long as the insurance benefits your business and is used for business purposes. You can dig deeper into what this could mean by dividing it into two categories: ordinary and necessary, both of which are vital. An ordinary business expense is one that is commonplace within your field of business or industry whereas a necessary business expense is one that helps with the success of your business, albeit being appropriate.
One very important note to understand is not all business insurance premiums can be written off. If the insurance policy in question is not considered ordinary and necessary, it is unlikely that the IRS will approve it.
In conclusion, business insurance can be deemed as a tax write-off as long as it meets the requirements mentioned above. As a business owner, check to see if your business insurance qualifies for tax deductions!
Check out the link below for a list of other tax deductions you can claim this tax season!
What questions do you have about tax season? We are here to provide help with tax preparation, accounting, payroll management, and business formation! R&I Tax and Bookkeeping is here to help! You may contact us via our 'Contact' page at https://www.ritbsinc.com/contact. We can also be reached via phone at 253-777-1106. Happy Holidays!
Can you write off business insurance? | insurance tax ... (n.d.). Retrieved December 16, 2021, from https://www.thehartford.com/business-insurance/write-off-business-insurance
Osterhaus, E. (2021, February 1). Complete list of small business tax deductions (2021). QuickBooks. Retrieved December 16, 2021, from https://quickbooks.intuit.com/r/taxes/small-business-tax-deductions/