Tax Day is only a week away (Tuesday, April 17) — here are the deductions you should take to maximize your refund.
With the April 17th tax deadline rapidly approaching, chances are your stress levels are currently approaching their peak. The good news is, while doing your taxes are a royal pain, as an independent insurance agent, there are a number of deductions and write offs that you can make in order to maximize your refund — or at least minimize the amount of cash you have to fork over to Uncle Sam.
As a “small business owner,” the IRS allows you to deduct certain expenses that are considered “ordinary and necessary” to “running your company.” Common work-related expenses fall into the “ordinary” category, while “necessary” expenses are those costs that support business operations directly. With those requirements in mind, here are the seven tax deductions that every you should definitely take when filing your returns
1. Car Mileage
Since agents spend a lot of time on the road visiting clients and traveling to business meetings, the miles driven in their cars qualify as a deductible business expense. The standard mileage deduction for 2017 is 53.5 cents per work-related mile driven — in 2018, that rate will rise to 54.5 cents per mile.
2. Home Office
If you’re one of the many insurance agents who works from home rather than a traditional office, you can actually deduct a portion of your rent, mortgage, insurance, utilities, repairs, etc. from your 2017 taxes. In order to determine how much you can actually deduct, you’ll have to calculate the how much of your home’s total square footage is a dedicated workspace. For example, if your home office is 200 ft2 and your home is 2,000 ft2 total, you can deduct 10% of your total living costs when filing. You can also opt to use the IRS’ simplified option for your home office deduction, in which you just deduct $5 per square foot (maximum of 300 square feet allowed).
3. Business Meals and Travel
Insurance agents regularly attend faraway conferences to expand their professional networks and build their knowledge base. If you recently took a trip strictly for business reasons, you can deduct your travel expenses for hotel stays and even the cost of WiFi. Business meals with clients also qualify for a deduction, typically 50% of the total cost of the meal.
4. Health Insurance
Unless they have access to coverage through a spouse, many self-employed independent agents will have to purchase their own health insurance. The good news is that the amount you pay in annual premiums — both for you and your dependents — can be deducted from your annual taxes.
If you’re an independent agent, chances are you’re investing in a number of different advertising channels and tactics and paying for it directly out of your own pocket. Any and all advertising — from internet leads to business cards to Google AdWords campaigns — qualifies as a business expense, and can therefore be deducted from your gross income before taxes.
6. Training & Education
Agents periodically take courses to maintain their insurance license, obtain new licenses, and/or expand their skill set. The travel and tuition costs of these courses are typically tax deductible. Keep in mind, however, that only classes that directly relate to your profession qualify.
7. Self-employment Taxes
Under IRS regulations, independent agents pay both the employee and employer portion of the so-called “self-employment tax” that funds programs like Medicare and Social Security. An agent who earns less than $118,500 in net profits during the tax year gets taxed at a 15.3% rate based on 92.35% of his or her profit. The agent does get a break if he or she pays their self-employment tax in quarterly increments during the year. In that case, the payments qualify as an expense and agents are able to deduct half of the payments on their tax return.If you’re looking for more information on relevant tax deductions and exemptions, the IRS website and the blogs from online tax platforms like TurboTax and H&R Block are great resources. Good luck and happy filing!