As April 15 (aka Tax Day) is approaching, many are looking to find as many tax deductions as possible. The question we’re going to address today is whether or not insurance premiums can be written off on tax forms.
The answer is a little more complicated than a simple yes or no. For example, owners of personal insurance policies are not able to file those policies for tax deduction purposes. However, if your insurance policy is business-oriented, there are ways to file that on tax form to receive a deduction. Even independent contractors through a shared economy app like Uber or Lyft may file for tax deductions. Unfortunately, this requires that the individual report the income they earned on that job to be taxed.
The first thing you need to do is list the insurance policies that you would like to deduct on the longer version of a Form 1040. The IRS will not accept this type of request on a condensed 1040 A or the abbreviated 1040 EZ. The extra work that this requires may not be worth it to those who typically take only the standard deductions during tax season.
In order to complete the process, you must also file Schedule C Profit or Loss from Business. You must then determine the amount of additional work you are willing to do in order to claim an insurance deduction. The easier option is following a provided, simplified formula. However, depending on the amount of deductions you believe are available, you may find it worthwhile to manually calculate your precise insurance expenditures.
The simplified method for filing tax deductions on business use of your vehicle is computed by multiplying the number of miles you traveled by 54 cents. The IRS says that this formula should adequately cover any fuel, repairs, maintenance, or insurance expenditures that you covered in the preceding year. A little more complicated method requires you to calculate the percentage of total car costs for the year based on the number of total miles driven vs. miles driven for business.
The IRS has developed a similar method for calculating home office deductions. Individuals may claim $5 per square foot for any space dedicated solely to office use. The maximum is set at 300 square feet, or $1,500. You may choose to go the more complicated route by adding up all home-related expenses, including mortgage payments, maintenance, property tax, insurance, utilities, etc… You must then deduce the percentage of total space in the home occupied by office space. Whatever that percentage is is the percentage of your home-related expenses that you can receive a tax deduction for.
Contact us at www.howardwebbins.com or 765-644-8847 with any questions regarding your insurance needs.