J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Deducting Property Insurance and Other Casualty/Theft-Related Items

It is well and good that you can write off your casualty and theft losses. But as a practical matter, you should carry enough insurance to cover these situations so that you will not suffer any financial loss should these events befall your business. If you carry insurance to cover fire, theft, flood, or any other casualty related to your business, you can deduct your premiums (see Chapter 22).

If you maintain a home office, you must allocate the cost of your homeowner’s policy and deduct only the portion allocated to the business use of your home as part of your home office deduction (as discussed in Chapter 18). Be sure to check your homeowner’s policy to see that it covers your business use. You may have to obtain additional coverage if you use your home for certain types of business activities. For example, if clients or customers come to your home, it may be advisable to increase your liability coverage. The cost of additional coverage for business guests (which may be in the form of a rider to your policy) may be rather modest. Similarly, your homeowner’s policy may not cover business equipment in your home office (e.g., computer, fax, or copying machine). Again, a small rider may be necessary to protect you against equipment loss.

If you are a manufacturer who includes business insurance as part of the cost of goods sold, no separate deduction can be taken for these insurance premiums.

If you self-insure ...