What kind of insurance do you have? Do you have enough? Do you have too much? Is it tax deductible?
Let’s begin with…What is insurance? According to Merriam-Webster, insurance is “an agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen.”
Here in Arizona we have blistering heat in the southern parts of our state. We have freezing cold in the northern parts of our state. We have had little earthquake tremors as well as devastating fires. We have had some tremendous wind storms and most recently so much rain that we had serious flooding issues.
There are many type of insurance:
- Road-side assistance
- Long-term care
- Travel insurance
- Amusement location or Event insurance
- Worker’s compensation
- Third Party insurance
- Key-man insurance
Can you think of any others?
Do you have insurance to cover your losses? What does your policy cover? What are the limits of coverage. Do you have a deductible that needs to be met before the policy will pay you? If you do receive proceeds from your policy, must they be included in your income?
Just because you have insurance to help you cushion your loss, does not mean you will be successful when filing your claim. Just because you choose to purchase insurance does not mean it is deductible on your tax return.
Do you itemize your deductions? You may be able to deduct your medical, dental and long term care insurance premiums. But they are not 100% deductible. And if your policy pays you a daily amount for being the hospital, or for loss of limb or body part, that premium is not deductible.
Are you insuring items used in your business? Generally the business or business owner may be able to deduct the premiums paid. But what kind of insurance is it? What is being insured?
If you are an employee, you may want to insure the tools you own and use in your work. You must itemize deductions in order to deduct your policy premiums, and then they are not 100% deductible.
If you use your vehicle in your work, and you keep your log of business miles driven, you have a choice. You may choose to deduct the business percentage of your actual expenses, which may include vehicle insurance, or you may choose to take the cents-per-mile method of deduction.
There are always more questions than can be answered in any article. You have particular circumstances. You need an answer based on your situation. If you want to talk about your individual question, email me, You can’t buy your answer, but you can schedule a consultation with me. Nellie@BulletProofYourTaxes.com