A few deductions to review and document for 2017 to get you prepped for the next tax season.
To steal a line from Albert Einstein, "the hardest thing in the world to understand is income tax." No one likes thinking about either, but during this glorious time of year it seems near impossible to avoid talking about, reading about, or thinking about taxes.
So, make sure you leave nothing on the table this year. See below for your MUST LIST of tax liability deductions.
- Licensing: The money you pay to receive and maintain your insurance licenses is deductible.
- Don't forget: write off your team's licensing fees if your agency pays for it
- Continuing Education: You can deduct any costs you pay for continuing education towards your insurance license. The education must maintain or improve skills necessary to be an insurance agent. The fees, materials, and travel expenses are deductible as well.
- Don't forget: costs for subscriptions and books
- Mileage Expense: If you are diligent in keeping up with the miles you drive, you will have a big advantage come tax time. The miles you drive to and from meeting with clients are deductible - which can definitely add up. There are even mobile apps that you can download to help you track your miles. One that we have worked with and recommend is called MileIQ and it works great! The IRS supports 2 ways to deduct a vehicle:
- Actual Expenses: business mileage must be tracked to determine percentage of use. That percentage would then be applied to all expenses for maintenance, gas, etc.
- IRS Set Price per Mile: 53.5 cents per mile for 2017
- Vehicle Expense: Section 179 allows bonus depreciation for SUVs and Pick-up Trucks above a gross weight of 6k lbs.
- Live in an urban area? Check to see if your state offers a Commuter Tax Credit. This is a great way to efficiently get more money in your team's pockets while being tax efficient.
- Operating Expenses: Self-employed agents can deduct necessary and ordinary expenses they incur in running their business. There are several expenses that can fall into this category; some examples include: office supplies, laptops or computers, business cards, etc. If you are considering deducting home office expenses such as rent and utilities, make sure you have a dedicated office in your house where you work. Shared space would not be considered deductible. People used to claim that home-office deductions triggered an audit, but according to Forbes: "...I don't think the IRS is looking as closely at home-office deductions anymore. Just look at the way we work today: the requirement that people go to a 'real office' for their jobs has diminished." As more and more people are working out of their home, the less the IRS will raise a flag when home office deductions are filed.
- Meals and Entertainment: Generally, whenever you meet a client, prospect, or business associate at a restaurant or cafe for business purposes, you can deduct 50% of the tab from your income. Any lavish expenses will raise red flags, though, so don't try to use them.....and the event or meal needs to be directly related to business purposes. The guidelines state that you must also discuss business with the other parties during the meal, or event, with a specific reason to believe in a favorable business outcome.
- Remember: Keep receipts, jot down the type of person entertained (client/prospect/other), and put a brief description of the purpose.
- Don't forget: Ask your friends and family to send you business if the live in the area!
- Computer: If your computer is used at least 50% for business, you can deduct the computer, printer, scanner, and other ancillary equipment plus paper, ink, software, and maintenance. If it's a home computer used less than 50% for business, you can depreciate and deduct the computer and printer over five years. A percentage of the ink, paper, and consumables are deductible.
- Cell Phone: If your personal cell phone is used for additional purposes other than business, SORRY, you're out of luck. The IRS no longer allows this option. However, if the cell phone is exclusively for your work, it is deductible, as is a landline in your office (NOT your home landline, unless its use is exclusively business-related).
- Charitable Donations: These are deductible; just be sure to get a receipt!
It is important to think about all of these tax liability deductions NOW and not at the end of the year. Let us know if we can help!
Its easiest when you work with an accountant that knows your industry and helps manage your books throughout the year.