Review these 2021 income tax tips for insurance agents as you complete your tax forms
- View 16 deductions that most insurance agents can take, from CEUs and licensing fees, to mileage and accounting services.
- Whether you receive a W-2 or a 1099, you can lower your tax bill through these strategies.
- If you’re an agency owner, view the list of deductions specifically for you, from salaries & benefits to retirement contributions.
Insurance agents, you have exactly 20 days before your taxes are due. Whether you’re nearly finished or just beginning your tax preparation, these 2021 income tax tips for insurance agents can help you find ways to save. Whether you receive a W-2 or a 1099, you can lower your tax bill through these strategies.
Most of these 2021 income tax tips for insurance agents outlined below were provided by Mazuma, a bookkeeping and tax service company in Utah.
Claim these 16 deductions
Travel & mileage
- Vehicle mileage. Use your vehicle for business? You can deduct some auto expenses based on how many business miles you drive. For 2021 taxes, that number is $.56 for each business mile driven. This mileage deduction applies to self-employed insurance agents. While you can’t deduct miles to and from your office (your normal commute), you can deduct the miles you drive to meet with clients or go to conferences or events.
- Business travel. Travel expenses such as plane tickets, rental cars, hotels and meals are deductible when your trip is business-related.
- Seminars, trade shows, conventions. These events often have a high ticket price, but it’s deductible, along with your travel expenses to the event.
- Business meals. You can deduct a meal as a business meal, but there needs to be a business purpose, such as meals where you discuss business or meet with clients, partners, or prospects.
- Training and education. If you’re taking CEU courses or other training to advance your professional career, these costs are deductible, particularly if they meet the requirements for additional certification or licenses for your role as an agent. Check with your tax preparer to determine if your course meets the requirements to qualify as a tax deduction.
Individual agent expenses
- Advertising & marketing. You can deduct advertising expenses directly related to your business activities. Whether you give away water bottles with your logo at community events, run print or digital ads, spend money to update your website or hand out business cards at a function, you can deduct any marketing money you spend. Speaking of your website,
- Website & software. No doubt you use a myriad of software, platforms, subscriptions and services in your business. Annual costs for these are deductible, as are expenses to host, maintain or update your website.
- Cell phone. Even if you use the same phone for both business and personal use, you can deduct the total cost. On a family plan? You can only deduct your portion of the bill.
- Home office. If you have a dedicated work space in your home, you can deduct a portion of your home expenses, such as rent, utilities and internet. To qualify, your home office needs to be a fully dedicated workspace in regular use. In other words, your dining room table probably won’t count.
- Supplies & equipment. Computers, monitors, printers, dedicated phone lines, fax machines – all are deductible. Check with your accountant or tax adviser to determine if you should depreciate these items over a period of years. And don’t forget small office supplies, like copy paper, staplers, pens, business cards. While their individual costs may be minimal, they will add up over a year, so keep those receipts!
Agency owner deductions
- Business insurance. If you operate as a sole proprietorship or an LLC, your business insurance expenses are deductible. Mazuma says these insurance costs include:
- Property coverage for your office, equipment and furniture
- Liability coverage
- Professional liability and E&O
- Group health, dental and vision insurance for employees
- Work comp insurance
- Salaries & benefits. These can be deducted if they meet these three criteria: the “employee” is not the sole proprietor, a partner or an LLC member; the salary is reasonable and necessary; the services were actually provided.
- Interest. These days it’s hard to run a business without having a business loan of some type. Interest paid for your loan – even a business expense on your credit card – can be written off. You’ll need to provide your monthly statement or a amortization schedule to your tax professional.
- Retirement contributions. As a business owner, you have flexibility regarding retirement plans and contributions, allowing you to strategize as to when and how much you contribute to your retirement to lower your taxable income. Discuss your options with your accountant.
- Business services. Don’t forget to add in the fees you pay for your accountant, attorney, cleaning service, etc. These are also deductible.
- Taxes. Self-employed agents must pay self-employment tax which includes Medicare and Social Security taxes. If you’re a business owner, you can deduct half of the self-employment tax to lower your tax bill.
Last thoughts on 2021 income tax tips for insurance agents
Our best advice in these 2021 income tax tips for insurance agents is to keep all receipts organized, so that you’re not pulling out your hair searching for those missing invoices when handing off all documentation to your tax preparer.
It may be a good idea, when tax season is over, to schedule a tax planning meeting with your accountant for next year. Together you can plan for upcoming expenses and maximize your deductions, so that you know what, if any, adjustments to make in your quarterly tax payments.
Please note: Arrowhead General Insurance Agency, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.