What Tax Deductions Can Insurance Agents Use For Their Business?

An accountant using a calculator

What You Need to Know

Definitely seek out professional help with this.
Go in having some idea about what your tax advisor will say.
Read up on the QBID.

It’s tax season again, and I’m going to outline a tax deductions specifically for independent insurance agents.

First and foremost, get a professional to help prepare your tax return.

The following is only my understanding and includes the fact that an ordinary expense is a common or accepted expense in our industry. A necessary expense is one that’s helpful and appropriate for your business.

Second, anything you use for both home and business must be divided up into accurate percentages.

For example, say you have a home office that’s 400 square feet.

If your entire home is 2,000 square feet, you can only deduct 20% of your mortgage payments, insurance, utilities, repairs, and so on.

I took this information from Publication 535; check to make sure there isn’t a newer one.

This might make it easy to see a full overview of what you can deduct, to help you go over this with your tax advisor.

Car Allowance

Mileage driven.
Gasoline.
Oil.
Repairs.
Depreciation.
Parking fees.
Tolls.
Registration fees.

The standard mileage rate for 2022 is 62.5.5 cents per mile.

Use Schedule C and Form 2106 for these items.

Continuing Education

State licenses.
Renewals.
Courses.
Certifications.
Subscriptions to professional, technical, and trade journals that deal with your business field.
Books.

Insurance

Health insurance.
Long-term care insurance.
Dental insurance.
Business insurance.
Part of your homeowner’s insurance.
Vehicle insurance.

For these items, use Schedule A, Form 2106 and Form 1040. Note that you can only deduct insurance if it’s for your business or if you’re self-employed.

For homeowner’s insurance, you can deduct part of the cost based on the square footage of your home office.

Work Travel

Meals and entertainment.
Flights.
Baggage fees.
Taxis.
Hotels.
Tips.

These expenses go on Form 2106.

Half of the meals and entertainment tab can be deducted for business-related meals and entertainment.

You must keep receipts, list who was entertained, and record the purpose of the meeting.

Note that, if the meal is lavish or outrageously expensive, it will not count as a valid deduction.

Office Space

Home office.
Utilities.
Heat.
Lights.
Power.
Telephone service, but only for long-distance calls or a second line (the first line is not deductible).
Internet.
Water.
Sewage.
Office desk.

Repairs

Reconditioning floors.
Repainting the interior or exterior walls.
Cleaning and repairing roofs and gutters.
Fixing plumbing leaks.

Here, use Form 8829, Schedule C, and Schedule A.

For these deductions, divide the office space square footage by the square footage of the entire residence.

Once you figure out the percentage of your home that is just for your business, you can calculate the deductions above.

Office Supplies and Equipment

Computer.
Printer.
Scanner.
Paper.
Ink.
Software.
Maintenance.
Paper clips.
Postage stamps.
Presentation folders.
Copying costs.
Overnight deliveries.
Stationery.
Pens.
Paper.
Stapler.
Docusign.
Internet fees.
Greeting cards.

Use Schedule C.

To deduct the cost of your computer, you must use it at least 50% for business.

Random

Advertising.

Charitable contributions.