The cost of most types of business-related insurance is deductible. (Medical insurance is discussed in Chapter 19.) Examples of other deductible insurance include:
- Casualty insurance to cover flood, fire, storm, and other casualty destruction to property. Casualty insurance may include coverage for data recovery necessitated by destruction or damage to a computer system. This may be a separate policy or part of a comprehensive casualty insurance policy. Casualty insurance also covers loss of property by theft. Check to make sure your policy covers theft of laptop computers. If the policy does not provide this specific coverage, you can obtain a separate policy for this purpose. You may need separate coverage for certain casualties, such as floods, earthquakes, and wind damage.
- Accident and health insurance (including long-term care insurance). The business can deduct this coverage for its employees, spouses, and dependents. Employees can exclude this benefit from their income (with a limited exclusion for long-term care insurance). Self-employed individuals (partners, LLC members, and more-than-2% S corporation shareholders) cannot enjoy this tax-free fringe benefit. Instead, self-employed persons and more-than-2% S corporation shareholders can deduct a percentage of their health insurance costs on their individual returns. (Deducting medical coverage is explained more fully in Chapter 19.)
- Errors and omissions (E&O) insurance to provide protection for doing or failing ...