The
Ultimate 2020 Tax Deductions Checklist for Independent Insurance Agents By New Horizons Insurance Marketing It’s tax season again, and we’ve put together a full tax deductions checklist specifically for independent insurance agents. There are a couple things to go over before we get into the checklist: Get a Professional to Help You If you run your own show, it’s important that you use the help of professional. The saying goes that hiring a CPA (Certified Public Accountant) to do your taxes can pay for itself, because they find every possible deduction for you, not to mention making sure you have all your i’s and t’s dotted and crossed. CPAs are licensed by the state, and in order to keep a license, they have to keep up with current tax laws. Regular accountants aren’t licensed. If you don’t already have a CPA, you can always do some online searching, but call several offices to get a feel for your options.
All of the information found in the following checklist is taken from Publication 535. The checklist makes it easy to see a full overview of what you can deduct, but if you need more specifics on something, feel QBID Can Save Agents Money at Tax Time Another recent change is in the introduction of the Qualified Business Income Deduction, or QBID for short (read the full explanation at www.irs.gov/newsroom/thehighlights-of-tax-reform-for-businesses). In sum, if you report your income as a sole proprietorship (which many independent agents do), you might be entitled to a deduction of up to 20% of qualified business income. Ultimately, you’re going to pay less income tax because of this deduction. You can read a lot more about QBID, plus an example scenario of how much you could save on taxes, here: https://blog.newhorizonsmktg.com/new-2018-tax-bill-issaving-independent-insurance-agents-a-lot-of-cash.
When it comes to finding deductions, it’s your job to keep track of receipts and expenses. A CPA can help you pinpoint deductions, but if you don’t have documentation to back it up, you can’t claim them.
How to Keep Track of Your Tax Deductions
What Counts as a Deduction?
A lot of self-employed workers swear by the free app Evernote Scannable, which keeps track of your receipts. You simply take a picture of the receipt, and you can save it to your Google Drive, the Cloud, or whatever application works the best for you.
According to the Business Expenses document (www.irs.gov/pub/irs-pdf/p535.pdf) put out by the IRS (Publication 535), your business expenses must be ordinary and necessary in order to be deducted from your taxes. An ordinary expense is a common or accepted expense in your industry. A necessary expense is one that’s helpful and appropriate for your business. Secondly, anything you use for both home and business must be divided up into accurate percentages. For example, let’s say you have a home office that’s 200 square feet. If your entire home is 2,000 square feet, you can only deduct 10% of your mortgage payments, insurance, utilities, repairs, and so on.
march 2020
It’s a good idea to start keeping track of your receipts now for next year’s tax season, but it can be a HUGE pain.
This can be a pain-free way to make sure you get the most money back on your taxes. Also consider using services that automate your deductions, such as MileIQ or Automatic for tracking mileage or a system like Xero for automating business expense reporting. New Horizons Insurance Marketing is a respected National Marketing Organization that believes in the power and strength of independent insurance agents. For more information, visit www.newhorizonsmktg.com.
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