Tax season is here! It is a good time to start organizing all of your W-2s, 1099s, 1098s, or donation papers. Whether you’re a procrastinator or not, we are faced with the confusing task of filling out and preparing our taxes, or at least gathering our information for your tax guy/gal.
When we complete our taxes, most of us are in search of lowering our tax burden or to increase our return. As an Independent Insurance Advisors, I do get the question, “Are my insurance premiums tax deductible?” – I am not a tax advisor. I’d like to pass along some useful information on the tax deductible status for five common insurance coverages.
If you are self-employed and use your personal vehicle for business, you can take a tax deduction for your car insurance. For example, an independent sales professional who travels for work can take the deduction. However, only the actual mileage used for business travel is deductible. In other words, if you drive a vehicle 15,000 miles for business and 15,000 for personal use (a total of 30,000 miles annually) your deduction will cover half of your overall use.
Your insurance premiums are not tax deductible except under special circumstances. You do receive other tax benefits as a homeowner, but they are not related to homeowners insurance.
If you’re a landlord or a homeowner who uses part of your home for business purposes, you may be able to deduct a portion of your homeowners insurance. A tax advisor is your best resource in determining what you can and cannot deduct on your taxes.
Renters insurance is not tax deductible except in the following situations:
You use a part of your residence regularly and exclusively to operate a business. You then may deduct a portion or your renters insurance, based on the dimensions of the space where you operate your business relative to the total size of the premises.
You are an employee and work in both your employer’s office and your rented premises. In this case you can deduct a portion of your renters insurance in the same manner as a home office. Check with your accountant for complete details.
If you have a personal umbrella policy, your premiums are not typically tax deductible.
If you own a business and have an umbrella policy that supplements your other business liability policies, your premiums may be tax deductible.
One particular gray area exists with owners of rental properties. If you own homes and rent them out, you are conducting a business transaction, but you can also include your rental properties under a personal umbrella policy. In this case, you may be able to deduct a portion of your premiums on your taxes.
Health insurance is tax deductible if you are self-employed or have a health savings account. If you are self-employed, the premiums that you pay for health insurance for yourself and your dependent can be deducted from your taxes. If your dependents are covered under another insurance plan, you cannot deduct that premium.
A health savings account (or HSA) is used in conjunction with a high deductible health plan. You typically must buy these plans from an employer, although they are also offered through private insurance companies. Any amount of money that you contribute to your HSA account, up to a certain limit, is tax deductible.
Please remember to check with your tax advisor if you are unsure or have questions about tax deductions when completing and filing your forms. Please also remember that I can review your insurance coverages or help with any insurance questions that you may have – Happy tax season!
As an Independent Insurance Advisor, I am proud to service the greater Rockford area – including: Belvidere, Marengo, Loves Park, Machesney Park, Freeport, Rockton, Roscoe, South Beloit, and Beloit (Northern Illinois and Southern Wisconsin) areas. Offering insurance quotes for: home, auto, sr-22, renters, commercial, small business /commercial insurance.