what you need to know
- Be sure to seek professional help.
- Find out what your tax advisor has to say.
- Read QBID.
It’s tax season again, and I’m putting together a tax-cut plan just for independent insurance agents.
First, ask a professional to help you prepare your tax return.
The following is my understanding only, including the fact that common charges are common or recognized charges in our industry. Necessary expenses are those that are helpful and appropriate for your business.
Second, anything you use for your home and business must be divided by exact percentages.
For example, let’s say you have a 400 square foot home office.
If your entire home is 2,000 square feet, you can only deduct 20% of your mortgage payment, insurance, utilities, repairs, etc.
I got this information from publication 535; check to make sure it’s not newer.
This may make it easier for you to see a full overview of what you can deduct to help you work this out with your tax advisor.
- Mileage driven.
- parking festival.
- toll fee.
- registration fee.
The standard mileage rate for 2022 is 62.5.5 cents per mile.
Use Schedule C and Form 2106 for these items.
- State license.
- training courses.
- Subscribe to professional, technical and trade journals relevant to your field of practice.
- Health insurance.
- Long-term care insurance.
- Dental insurance.
- business insurance.
- Part of your homeowners insurance.
- car insurance.
For these items, use Schedule A, Form 2106, and Form 1040. Note that you can deduct insurance only for your business or if you are self-employed.
For homeowners insurance, you can deduct part of the cost based on the square footage of your home office.
- Dining & Entertainment.
- Luggage Day.
- cutting edge.
These expenses are recorded on Form 2106.
For business-related meals and entertainment, half the meal and entertainment tax is deductible.
You must keep receipts listing who was entertained and documenting the purpose of the meeting.
Note that if the meal is extravagant or outrageously expensive, it does not count as a valid deduction.
- work from home.
- Telephone service, but only for long distance calls or second lines (first lines are not deductible).
- the Internet.
- Renovate the floors.
- Repaint interior or exterior walls.
- Clean and repair roofs and gutters.
- Repair plumbing leaks.
Here, use Form 8829, Schedule C, and Schedule A.
For these deductions, divide the square footage of the office space by the square footage of the entire residence.
Once you figure out what percentage of your home is used solely for your business, you can calculate the above deduction.
Office Supplies and Equipment
- paper clip.
- presentation folder.
- Copy costs.
- Overnight delivery.
- Document signature.
- Internet Festival.
- greeting card.
Use Schedule C.
To deduct your computer costs, you must spend at least 50% on business.