When the taxman comes knocking, you want to answer that door holding the least possible amount of taxable income. Why? Because lowering your taxable income will ultimately put more money back into your pocket, and who doesn’t want that? Once you know the common deductions that you are entitled to as an insurance agent, you can make informed decisions in your day-to-day business life to reduce your overall taxable income.
What Are Some Common Deductions?
- Mileage. If you use a vehicle for business, you may be eligible to deduct auto expenses based on how many business miles you drive. A regular commute doesn’t count but if you drive to a client meeting or a conference, keep track because those miles add up and they can be deducted. Download an app or keep track by reading your odometer if you drive outside of your normal commute.
- Advertising. The IRS allows you to deduct advertising expenses related to business activities and promotions, within reason. If you buy business cards or a Facebook ad, these fall within deductible advertising costs. The cost of hiring someone to design ads for you is also deductible, so be sure to keep a running total of all those costs.
- Home office. You may be eligible to deduct some of your home expenses under this deduction but the IRS keeps a close eye on this deduction so be sure to only write off your office if it’s a dedicated home workspace used solely and regularly for your insurance business.
- Memberships. To be a successful professional you need to participate in some extra curricular activities. If you pay for membership of your insurance business-related groups, these can be deducted.
- Business meals and entertainment. As an insurance agent it’s not unusual to have to entertain clients or other employees, so you should know that those expenses are generally deductible up to 50%.
While these aren’t all the deductions you’re entitled to, it’s a good list to get the wheels turning to see how you can take everyday expenses and use them to your advantage. But if you’re like most people, organizing, saving receipts, and keeping all the information that goes along with tax filing in check, can easily spiral out of control. Find a system that works for you to keep you on track. With so many apps available, browse them all to see if there’s one that will fit your needs. If apps aren’t your thing, use an Excel sheet or Google Docs. Habits take time to establish, the important thing to remember is the more you keep track of, keep records of, and deduct, the less taxable income you’ll have, ultimately putting more money back into your pocket once April rolls around.
To Hire a Certified Public Accountant or Not?
You might be hesitant to spend extra money to hire a Certified Public Accountant (CPA) but because CPAs are experts in their field, you should consider it. CPAs are licensed by the state and must keep up with current tax laws to keep their license. They will find every deduction available to you, they are up-to-date on tax codes, incentives, and programs to get you the most money when you file your taxes.