Life insurance not only provides protection, but also saving or investing. This means that we can accumulate, multiply, but also inherit funds. Are life insurance premiums tax deductible?
Life insurance premiums are not deductible for private individuals. They are considered a personal cost and therefore are not tax deductible. From the IRS’s point of view, paying life insurance premiums is like buying a car, cell phone, or other product or service.
Your contributions can be tax deductible if you use life insurance as a means of protecting business assets, such as office space or other capital. Life insurance cannot be written off as a business expense, it is not considered as a necessary business cost, so you will not be able to deduct the premiums paid for protection.
Costs incurred and costs of securing the source of income
Costs incurred to maintain the source of income are the costs that were incurred so that revenue from a given source of revenue would continue to be obtained and that such source would continue to exist.
On the other hand, the costs used to secure the source of revenue should be the costs incurred to protect the existing source of revenue in a way that guarantees the safe functioning of that source.
Therefore, the essence of this type of costs is their obligatory incurring in order to prevent future loss of income.
Therefore, if a taxpayer, when conducting business activity, buys a life insurance policy, which is to constitute a collateral in the event of an accident and, accordingly, the inability to conduct business activity, he may consider that this is an expenditure indirectly securing the source of income.
However, it should be noted that the expenses related to the payment of life insurance premiums for a self-employed person are personal expenses.
Therefore, they are not directly related to the business activity and are not expenses incurred in order to generate or increase income and to secure or preserve the source of income. Therefore, it excludes the possibility of including these expenses as tax deductible costs of conducted business activity.