Tax and insurance are both essentials when you are employed, self-employed, or have a family. If you are self-employed there are a number of tax benefits you should be aware of relating to insurance. By making sure you know about the different deductions you can make, you can ensure you get the best out of your tax return. Here we talk about four different areas of insurance and how they relate to tax.
1) Health Insurance
You can most likely deduct health insurance premiums when you are self-employed. In many cases you can deduct premiums that you are paying out for things like dental, medical, and long-term care insurance. You can also deduct for premiums you pay for your spouse or for your dependents. In order to get this deduction you need to fill in page one of the Form 1040. In this way you can benefit whether or not you itemize the deductions. The deduction lowers the overall adjusted gross income.
There are certain eligibility rules that need to be met if you are going to deduct health insurance premiums. These include only being able to claim for the months of the year when you were not eligible to be in an employer health plan. Your deduction must also not exceed the amount of income you earn in the year.
If you own a business and you pay health insurance premiums for employees then you can deduct these premiums.
This all represents a valuable tax benefit and you should certainly look into claiming the deductions you are due if you are self-employed.
2) Homeowners Insurance
In most cases you cannot make a deduction for your homeowners insurance, only for private mortgage insurance. But if you are claiming rental income then you can deduct the property insurance because it is classed as a business expense. If you use part of your house for business means, you can deduct a proportion of your homeowners insurance since this is also classed as a business expense. You should consult a tax professional if you are attempting to itemize these expenses to make sure that you are following the correct regulations and that you are legally deducting homeowners insurance.
3) Life Insurance
If you are paying life insurance premiums for yourself then they are not typically tax-deductible. But if you are paying premiums for a life insurance policy that protects business assets then you could be able to deduct this cost of these insurance premiums. This is also documented on Form 1040, on Schedule C.
When paying life insurance premiums for an employee you can deduct the premium as part of your business expenses. However, if you are going to benefit from the policy at all, you cannot make a deduction based on these premiums. Again, consult a tax professional if you have concerns about deductions based on life insurance.
4) Travel Insurance
You may be able to deduct your travel insurance expenses if you are self-employed and you travel for business purposes. Your travel should be solely for business purposes related to your business as a self-employed individual. If it is part leisure and part business you need to portion off the trip and can only deduct the part that is for business.
Travel insurance for visiting clients, traveling to a conference, travel to a training course or a convention, or travel for the purposes of attending a trade event can be deducted as a business expense. You may also be able to make a deduction for travel insurance as it relates to attending promotions or for educational events related to your work – which are not classed as entertainment. The course should be directly related to your business.