Insurance agents have many different deductions but they have to keep meticulous records in the event of an audit. Both captive agents and self-employed reps get the same deductions they simply come off different places on the tax forms. While the independent pays his own FICA for employer and employee, he has the advantage of taking it from Schedule C, which lowers his overall income and allows him to get the benefit of the full standard deduction.
Mileage is a huge deduction for the insurance representative. However, there are some pitfalls. The IRS does not allow you to deduct the mileage to your office if that is the first stop of the day, or the mileage home from your last appointment or office. For efficient tax planning, schedule your first and last appointment close to home. You can deduct mileage after that. Keep a meticulous mileage log. If you've taken mileage, you can't take actual auto expense, nor can you switch back and forth with the same vehicle. It's one or the other. Actual auto expense is the total you spent on your vehicle, including depreciation. You multiply this time the percentage of business use. No matter which method you use, you can take a deduction for tolls.
Sealing a deal over a lunch or dinner is a standard method of operation for insurance reps. The IRS knows this. But the IRS is unwilling to allow you to deduct your own meals when you entertain.
State licenses and renewals are tax deductible as long as you're already an agent. If you paid for the license before you entered the business, it isn't deductible. The training for the license isn't deductible either, just as a doctor can't deduct his college education to prepare him for the field of medicine. Continuing education courses are however, deductible.
The IRS knows everyone has to eat so if you take a client to lunch, you only get to deduct 50 percent of the cost. As long as the meal is under $75, the IRS doesn't require a receipt. Keep it anyway. It's just a good habit. Taking a client to an event to secure business is 50 percent deductible. You have to expect to write business to make this deductible.
If you have to attend a seminar, see a client at a distance or pay for your own way to a home office meeting you can take the cost of travel to the destination. The cost of other transportation such as taxis from the airport or shuttle service to the hotel is also deductible. If you find that keeping all the receipts is a hassle, use the per diem rates for food and lodging found at the site provided in the reference section. If you have to have a suit cleaned while at the event, it's deductible. Don't try to take off the deduction for cleaning suits while at home. It won't fly.
Your computer, ancillary equipment, paper, ink and software is deductible if you use it at least 50 percent for business. Under 50 percent, you depreciate and deduct the computer and printer over five years. All the ink, paper and consumables are deductible.
Cell phones are mandatory for a busy insurance rep. It's the lifeline to clients and income. They are deductible. Postage, envelopes and any secretarial services you use are also deductible. Business cards are also important. The cost of birthday, anniversary and holiday cards to clients is also deductible. Landlines devoted to business are also deductible.
Tax preparation, books and magazines on insurance, prospecting lists, briefcases, PDA or other similar devices, donations, advertising, professional organizations and reasonable gifts for clients are deductible. If you have an office in your home, you can deduct a portion of your utilities. Of course, if you rent an office elsewhere or own it, you can deduct the entire cost.