Small Business Insurance Write-Off Opportunities

If you are a small business owner, the insurance write-off process can save you money and help improve your bottom line. There are many types of insurance you should have for your small business. You can write off nearly all of them as business expenses. Read more below about the insurance write-off opportunities for small businesses.

Types of Insurance Every Small Business Should Have

Every small business needs health insurance for its owner and all eligible employees. If you use a vehicle to conduct key elements of your business, such as deliveries, visits to clients and customers, and travel for business meetings, you will need auto insurance. If you operate business premises outside your home, you will need liability, fire and contents insurance. You might also consider a separate policy for business equipment such as your computer, printer and fax machine. All of these types of insurance are considered "ordinary and necessary" to operate a business successfully.

Writing Off Health Insurance

If your small business has health care insurance just for you, established under the name of your company, you can write off the cost of the premiums against your business income. As your payroll grows, you can set up a relatively inexpensive group health insurance package for your employees. You will be able to write off the premiums you pay as the employer against the payroll taxes you submit to the state or federal government.

Writing Off Auto Insurance

You can write off the auto insurance you pay for your business vehicle using the actual cost method of claiming auto expenses. If the vehicle, such as a delivery truck or van, is used solely for your business, you can claim the entire insurance expense. If, however, the vehicle is also used for some personal travel, calculate, based on your annual mileage, how much of the travel is for business as a percentage. You can then claim that percent of the cost in your business expenses.

Writing Off Business Premises Insurance

You can write off your liability, fire, contents, inventory and business equipment insurance for premises outside your home in full as business expenses. Consult the IRS Publication 535 for all the business expenses you are entitled to claim. If, however, you do most of your work out of a home office for your small business, you will need to show the exact percentage of your home's square footage that is occupied by your home office. You can then write off a portion of your home and contents insurance to cover the costs for your small business home office. Refer to the IRS document, Publication 587, "Business Use of Your Home," to determine the exact process for writing off home-based business costs.

What Cannot Be Written Off--Items to Capitalize

You will not be able to write off the capital costs of starting your business and building its infrastructure, such as the premises, office equipment purchases and ongoing inventory. You will need to capitalize them, in order to allow for depreciation over several years of your business operation. Consult your accountant about the process of depreciating the tangible assets of your business.

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