Can Life Insurance Premiums Be a Business Expense?


Some insurance premiums -- like medical, dental, vision and disability insurance premiums -- are tax deductible expenses for a business. However, life insurance premiums are not deductible if the business itself or the business owner is a beneficiary.

Deductible Life Insurance Premiums

Some companies pay life insurance premiums on behalf of employees. According to the IRS, these premiums are deductible as long as the business is not directly or indirectly the beneficiary. For example, if the employee or the employee's family is the beneficiary of the policy and the company receives no payments in the event of the employee's death, the business may deduct the expense.

Deducting Life Insurance Premiums

If you do own a business and the life insurance premium payments you've made qualify as deductible, you can deduct the expense on your main business tax form. Include the life insurance premium payments on the Other Deductions line item. In the Other Deductions schedule, label the amount as Deductible life insurance premium payments.

Nondeductible Life Insurance Premiums

Oftentimes life insurance policies are corporate-owned, meaning that the business gets a payout if the employee dies. If this is the case, the premiums aren't deductible. That means, if you own a sole proprietorship, S corporation, LLC, partnership or a corporation, your own life insurance premiums are never deductible. Payments made on behalf of others aren't deductible if you're a beneficiary of the policy.

Handling Nondeductible Expenses

Life insurance premiums are still a valid business expense for financial reporting purposes. That means, if you prepare your financial statements under generally accepted accounting principles, the payments should be listed as an expense. Since they're not allowed as a tax deduction, they're considered to be a permanent book-tax difference. When you file your tax return, let your tax accountant know how much of your life insurance premium payments are nondeductible. Your tax accountant will keep track of these differences so that you reconcile your financial accounting income to your tax income.

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