Life insurance is one way by which people can provide financial protection for their loved ones after they pass away. Premiums can cost from hundreds to thousands of dollars a year, and unfortunately for taxpayers, they are generally not considered tax-deductible. This is because the IRS considers them a personal expense that is not directly related to the operation or maintenance of a business.
However, there are some exceptions and special circumstances where life insurance premiums can be deducted from your taxable income.
READ ALSO:
When are life insurance premiums tax-deductible?
For example, if you are business owner and purchase life insurance for your employees as a benefit, you may be able to deduct the premiums as a business expense on your tax return. In this case, the policy’s beneficiary should neither be the company nor its owner.
A deduction could also be possible if you bought life insurance as part of a buy-sell agreement. The policy must be related to your business, and the premiums must be reasonable and necessary to your company’s operations.
If you are a self-employed individual, you may be able to deduct a portion of your premiums as a business expense if the life insurance policy is used to secure a business loan or is part of a qualified retirement plan.
Giving to charity
Another instance where premiums could be deductible is if the life insurance policy were donated to a qualified charity. This will only apply if the charity becomes both the owner and beneficiary of the policy.
Tax regulations can be complex and are subject to change, so it’s a good idea to consult with a tax expert or professional to get some guidance on your particular situation, and determine if your life insurance premiums are tax-deductible.
