Is Insurance Deductible?
All family child care providers should have adequate insurance to protect themselves, their family and their business. Here’s a guide to help you understand which types of insurance policies are deductible as a business expense and which are not.
Business liability insurance: This expense is 100% deductible on Schedule C, line 15.
Car insurance: You can only deduct the business use percentage on Schedule C, line 9 if you use the actual vehicle expenses method of claiming your car expenses. If you use the standard mileage rate, you cannot deduct your car insurance.
Disability income insurance: You cannot deduct this expense, as it is considered personal.
Health insurance: If you aren’t eligible to be covered by medical insurance through an employer, you can deduct 100% of the premiums for your own health insurance on Form 1040. However, you can’t use this deduction if you are eligible for health insurance through an employer, even if you decline to be covered under it and choose to buy your own insurance. If you set up a health reimbursement arrangement for your spouse you can deduct 100% of the insurance premiums on Schedule C, line 14.
Homeowners insurance: You can deduct the Time-Space percentage of this expense on Form 8829, line 17.
Life insurance: This is not deductible unless you incorporate your business and offer it as an employee benefit.
Long-term care insurance: Long-term care insurance covers the diagnostic, preventative, therapeutic, rehabilitative, and personal care services that would be required if you were to become chronically ill, including the cost of a nursing home or an in-home health care worker. Part of this expense may be deductible on Form 1040, depending on your age and the type of policy you have. It's not a business expense.
Renter’s property insurance: You can deduct the Time-Space percentage of this expense on Schedule C, line 15.
Umbrella insurance: This insurance expands the coverage of your homeowners and car insurance. If the policy covers for damages resulting from your business it would be deductible on Schedule C, line 15. Check with your insurance agent to see if your policy covers your business assets.
Workers’ compensation insurance: Workers’ compensation insurance for yourself or your employees is 100% deductible on Schedule C, line 14.
Tom Copeland – www.tomcopelandblog.com
Image credit: https://www.yg-galaxytour.com/secrets-of-michigan-workers-comp-insurance-companies-and-how-they-impact-you/
For more information about what’s deductible, see my book Family Child Care Record Keeping Guide which lists over 1,000 allowable business deductions.
