When you’re running a business, every dollar counts. From overhead to payroll, your expenses can add up fast. So, it’s only natural to wonder: Is business insurance tax deductible? The short answer is yes—in most cases.
At Eugene C. Yates Insurance Agency, we’ve been helping Sacramento business owners protect their operations and save money since 1946. Here’s what you need to know about deducting business insurance on your taxes.
What Makes Business Insurance Tax Deductible?
According to the IRS, you can deduct “ordinary and necessary” expenses that are directly related to operating your business. Most business insurance policies fall into this category. This means your insurance premiums may qualify as legitimate business expenses—and you can write them off at tax time.
Common Types of Deductible Business Insurance
Here are several types of business insurance that are typically tax deductible:
- General Liability Insurance – Covers lawsuits and third-party injuries. Fully deductible.
- Commercial Property Insurance – Protects your building and equipment from fire, theft, and more.
- Professional Liability Insurance (E&O) – Covers claims of negligence or errors in service.
- Workers’ Compensation Insurance – Required in most states and fully deductible.
- Commercial Auto Insurance – Deductible for business-use vehicles.
- Business Interruption Insurance – Helps replace lost income during disruptions. Yes, it’s deductible.
- Cyber Liability Insurance – Increasingly common and also deductible if it protects business operations.
What’s Not Deductible?
Not all insurance premiums are tax-friendly. For example:
- Life Insurance – If your business is the beneficiary, the premiums are not deductible.
- Self-insured reserve funds – Money you set aside to cover potential losses isn’t deductible like a premium would be.
- Insurance for personal use – If you’re using coverage for both personal and business use, only the business-related portion is deductible.
Keep Good Records
To stay on the IRS’s good side, make sure to:
- Keep copies of all your insurance policies
- Save invoices or receipts for premium payments
- Document how each policy relates to your business
When in doubt, consult a tax professional who understands the nuances of small business deductions.
Let Us Help You Maximize Coverage and Value
Choosing the right insurance isn’t just about protection—it’s also about making smart financial decisions. At Eugene C. Yates Insurance Agency, we’ll guide you to the best coverage for your business and ensure it aligns with your financial goals.
Need a custom quote or want to review your current policies?
📞 Call us today or request a free consultation online.
Proudly serving Sacramento business owners since 1946—dependable, experienced, and always working to save you money.