Can I deduct business insurance premiums as a self-employed person?
Yes, premiums paid for business-related insurance are deductible as a business expense. This includes liability insurance for your professional services or business operations, commercial property insurance if you own or rent a business space, and errors and omissions (E&O) insurance in professional fields.
Personal life insurance premiums, disability insurance premiums (with limited exceptions), and personal homeowner or auto insurance are generally not deductible as business expenses. However, if a portion of your home insurance is attributable to a business workspace, that portion can form part of your home office deduction rather than a standalone insurance deduction.
The deduction applies in the year the premiums are paid or become payable. If you prepay a multi-year policy, you may need to prorate the deduction across the coverage periods rather than claiming it all in the payment year. Keeping the policy documents and payment receipts is important to support the deduction.
Key takeaways
- Premiums for liability, E&O, and commercial property insurance are deductible business expenses.
- Personal life insurance and most disability insurance premiums are not deductible.
- Home insurance attributable to a business workspace may be claimed through the home office deduction.
- Multi-year prepaid premiums may need to be prorated across coverage periods.