Insurance -A Tax Deduction

            Q: As a businessperson, I have taken out several types of insurance. Are they all deductible?

            A: Generally speaking, yes.

            Q: How about my car's insurance?

            A: If you use it strictly for your stock photography business, yes.

            But it's deductible only if you don’t take the Standard Mileage Allowance. Be sure to keep a logbook in your glove compartment to record all the annual mileage related to your photographic excursions.

            Q: How about life insurance?

            A: As a self-employed photographer, you can't deduct the cost of life insurance on yourself. If you are employed as a photographer elsewhere, your personal premiums for group term life insurance paid by your employer on your behalf are deductible, but only if your employer is not a beneficiary. There is special provision if coverage exceeds $50,000. In this case, the premiums must be included in the employee’s compensation as additional wages, subject to payroll taxes.

            Q: What if I have an employee(s)?

            A: Workers’ compensation insurance for your employee(s) is deductible. For self-employed independent photographers, workers’ compensation premiums for yourself are deductible only if your state requires you to cover yourself. If your state law does not require your own coverage, it is not deductible.

            Q: I have business interruption insurance; is it deductible?

            A : It may or may not be, depending on what the business interruption is. This is an area to make sure of exactly what is being insured and what is not. Check with your insurance agent for details on this one.

            Q: I work at home. Does my homeowners insurance cover my business also?

            A: In many cases it does. But this is an area again to check with your insurance agent If you are a SOHO (Small Office-Home Office) business, a portion of your home insurance premium may be deductible as a business expense in the case of fire, wind or flood damage, theft, etc. A percentage of your homeowner’s or renter’s insurance is usually deductible if you are eligible for the home-office deduction. See IRS Publication #587.

            Q: Where do I report my insurance expenses?

            A: Home-office insurance is reported on Form 8829, "Expenses for Business Use of Your Home."

            Q: What if I pay my insurance premiums a couple of years in advance? Can I deduct the full expense in the current year?

            A: If you pay an insurance premium covering more than one year, you deduct only the current year's portion. Next year’s portion can be deducted next year.