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Be Prepared For Tax Season

Disclaimer: We are not tax professionals. Please consult with your accountant or CPA for tax advice.

Tax season is coming up! We want to help you be as prepared as possible. Taxes might be stressful as an independent agent, but preparation can help you not be overwhelmed. Let's start with one of the most important things:

Get Help From A Professional

If you're an independent agent, having a CPA (Certified Public Accountant) is important and helpful. They can help you find every deduction possible and make sure that your taxes are in order. If you'd like more information about why a CPA is important, here's an article.

Next up is deductions! A CPA can help you find deductions, but you must have documentation (receipts, etc.) to back them up.

What Do You Count As A Deduction?

According to the Business Expenses document 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.

Anything that you use for both home and business must be divided in accurate percentages. For example, if you have a home office that’s 200 square feet and your entire home is 2,000 square feet. In this case, you can only deduct 10% of your mortgage payments, insurance, utilities, repairs, etc.

For more specific details, refer to Publication 535 from the IRS. The 2021 edition has not been released as of Jan. 5, 2022, so this is the 2020 edition.

Top Tax Deductions For Insurance Agents

Keeping up with all of your receipts can be difficult, especially if you're new to the business. Even if you don't have all of the small expenses, make sure to keep track of and deduct your biggest business expenses.

  • Office/Building rent or Home Office Space
    • If you have a physical office, the rent is deductible. If you work from home, your workspace is deductible. Your utilities, phone bill, and internet are also deductible.
  • Advertising
    • From Facebook ads to business cards, advertising costs are deductible.
  • Continuing Education and Training
    • Your state licenses and continuing education classes are all tax deductible, which can add up.
  • Travel
    • If you travel to take care of your clients or conduct any business, those costs are tax deductible. Your flights, vehicle, hotel, and parking costs are all tax deductible.
  • Software
    • Your CRM, scheduling system, and website maintenance are all tax deductible. These are some of the biggest expenses, so don't forget to write them off!

For a more detailed list of deductions, download our Tax Deduction Checklist!

Extra Tips

Keeping track of receipts is a vital part of getting all the deductions possible, but it also can be a pain. A lot of agents use Evernote Scannable, which helps you keep track of receipts digitally.

For tracking milage, apps like MileIQ or Driversnote can be helpful.

For keeping up with expenses, systems like Xero or Quickbooks are helpful.

Qualified Business Income Deduction (QBID) can help independent insurance agents pay less income tax. Read more here.

Overall, working with a tax professional is the best way to make sure that your taxes are properly filed. We hope this information and checklist can help you get things in order before talking with your tax professional and make things easier on you this tax season.

Download the Tax Deduction Checklist Here