Me Myself N My Mortgage Theories

Its tax time guys and by now most of you must have approached insurance companies so that you can deduct the premiums from the taxes.

Let me share with you my knowledge on tax deductible insurance premiums.

Private health insurance and dental plan premiums are deductible as a part of the itemized deduction for medical expenses. But you can only avail this deduction if you itemize and if the cost of the insurance policy is restricted to 7.5% of your income.

However, those who are self-employed can deduct health insurance premiums as an adjustment to their income without having to itemize. Until and unless the tax payer is not involved into some kind of group plan, 100% premiums are deductible.

If you use a car for business purposes, you can deduct your auto insurance. The deduction for business use of the car should be reported in Form 2106 if you are an employee. But if you are self-employed, then you need to report the deduction in Schedule C.

There is another type of insurance available in the market - homeowners’ insurance policy. Premiums on such a policy cannot be deducted on your primary residence. But you cannot deduct such premiums for your rental property. Those who work from home can also deduct a certain part of their insurance as a part of the home office deduction.

You can look forward to your liability insurance and professional insurance policies for tax deduction benefits. If you are an employee, you need to report these expenses as itemized deductions whereas you need to use Schedule C if you are a self-employed tax payer.

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This entry was posted on Tuesday, March 27th, 2007 at 5:49 am and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.