Are you ready to minimize your tax burden?
As business owners, there are a number of ways to lower your taxable income. This list of 9 tax deductions are common expenses that agents have when running their business that are not always accounted for due to lack of awareness.
Common Expense Deductions
1. Mileage (the Standard Rule)
If you use a vehicle for business you may be eligible to deduct your auto expenses based on how many business miles you drove. In 2017, you can deduct $.535 for each business mile you drove ($.54 per mile in 2016).
The standard mileage deduction is available for self-employed individuals like insurance agents that drive outside of a ‘normal commute’ – like between clients. There are a few circumstances that can prohibit you from deducting your miles, however you may still be able to deduct your actual vehicle expenses based on your business use percentage.
2. Marketing / Advertising
The IRS allows you to deduct reasonable advertising expenses that are directly related to your business activities. The deduction for advertising expenses is broad and can include many expenses depending on what industry you work in.
3. Home Office
You may be eligible to deduct the portion of your home expenses related to your business through the home office deduction, however there are a few things you need to know: one of which is that your home office needs to be used exclusively for business!
4. Business Meals
Insurance agents may regularly have to entertain customers, clients, or other employees as part of normal business activities. These meals can be either partially or fully deductible depending on the circumstances.
5. Business Travel
As an insurance agent, you often need to travel away from home to meet with clients, attend conferences, or trade shows and conduct business development.
6. Conventions, Seminars, Trade Shows, and Study Groups
Many insurance agents regularly attend industry trade shows, conferences, seminars, or study groups both near and far to support their business. Take advantage of the deduction!
7. Training and Education
If you take classes or training courses to further your professional education you may be eligible to deduct your tuition, related course materials, and certain travel costs.
8. Membership Dues
Being a successful insurance professional often requires that you participate in some "extracurricular" activities to help further your business goals. What memberships do you have?
9. Self-Employment Taxes
The IRS requires entrepreneurs to pay both the employee and the employer portion of their "self-employment tax," which includes payments into the Medicare and Social Security programs. If insurance agents earned less than $118,500 in net profit during the year, the tax is 15.3% of 92.35% of their profit.
The IRS allows insurance agents to deduct half of the self-employment tax they paid during the year as an expense on their year-end return.
Tax Minimization Techniques
Check out our blog for helpful financial tips for your agency: