The Ultimate Tax Deductions Checklist for Independent Insurance Agents

Tax deductions

The tax filing season is finally over. Did you deduct as much as you could have?

We developed a tax deductions checklist to make sure you don't miss out any deductions for 2018.

Before you start tallying your expenses, there are a few things you need to know.

  1. To be deductible, your business expenses must be ordinary and necessary.1 An ordinary expense is considered to be common and accepted in your industry. A necessary expense is one that’s helpful and appropriate for your business.
  2. Anything that you use for both home and business must be divided into accurate percentages. For example, if you use part of your home for business purposes, you might figure that your office space is 20% of your home. That means any mortgage payments, insurance, utilities, repairs, and depreciation can be deducted — but only 20% of it.
  3. All of this information can be found in Business Expenses (Publication 535), which is put out by the IRS. The downside to just going there for this information? It’s 54 pages deep. This checklist makes it easy to get the Cliff Notes, but if you want to delve deeper, refer to that publication.
 

Car Allowance

  •  Mileage driven → MileIQ can make this easy
  •  Gasoline
  •  Oil
  •  Repairs
  •  Depreciation
  •  Parking fees
  •  Tolls
  •  Registration fees

Note: Use Schedule C and Form 2106. The standard mileage rate is currently 54 cents per mile.

 

Continuing Education

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

Note: Use Schedule A. Any education that qualifies you for a new career won’t count — only continuing education will.

 

Insurance

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

Note: Use Schedule A, Form 2106 and Form 1040. 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 it based on the square footage of your home office.

 

Work Travel

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

Note: Use Form 2106. Half of the meals and entertainment tab can be deducted for business-related meals and entertainment. You must keep receipts, a note of who was entertained, and what the purpose of the meeting was. 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

Note: Use Form 8829, Schedule C, and Schedule A. For these deductions, you must divide the office space square footage by the square footage of the entire residence. Once you figure the percentage of your home that is solely 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
  •  Stationary
  •  Pens
  •  Paper
  •  Stapler
  •  Docusign
  •  Internet fees
  •  Greeting cards

Note: Use Schedule C. Your computer must be used at least 50% for business.

 

Random

  •  Advertising
  •  Charitable contributions
  •  Tax preparation fees (only for the part of your tax return related to your business)

Note: Use Schedule A and Schedule C.

 

A lot of self-employed workers can’t live without the app Evernote Scanner (free), which makes it easy to keep track of receipts. If you have trouble staying organized or just prefer everything to be digital, we recommend checking it out.

If you have any questions, contact your tax preparer. In the meantime, keep your receipts!


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