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Income Tax Forms

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Income Tax Forms

Income tax forms Publication 926 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionTax questions. Income tax forms Future Developments For the latest information about developments related to Publication 926, such as legislation enacted after it was published, go to www. Income tax forms irs. Income tax forms gov/pub926. Income tax forms What's New Social security and Medicare tax for 2014. Income tax forms  The social security tax rate is 6. Income tax forms 2% each for the employee and employer, unchanged from 2013. Income tax forms The social security wage base limit is $117,000. Income tax forms The Medicare tax rate is 1. Income tax forms 45% each for the employee and employer, unchanged from 2013. Income tax forms There is no wage base limit for Medicare tax. Income tax forms Social security and Medicare taxes apply to the wages of household employees you pay $1,900 or more in cash or an equivalent form of compensation. Income tax forms Qualified parking exclusion and commuter transportation benefit. Income tax forms  For 2014, the monthly exclusion for qualified parking is $250 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $130. Income tax forms Reminder Additional Medicare Tax withholding. Income tax forms  In addition to withholding Medicare tax at 1. Income tax forms 45%, you must withhold a 0. Income tax forms 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Income tax forms You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Income tax forms Additional Medicare Tax is only imposed on the employee. Income tax forms There is no employer share of Additional Medicare Tax. Income tax forms All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Income tax forms For more information on Additional Medicare Tax, visit IRS. Income tax forms gov and enter “Additional Medicare Tax” in the search box. Income tax forms Credit reduction states. Income tax forms  A state that has not repaid money it borrowed from the federal government to pay unemployment benefits is a “credit reduction state. Income tax forms ” The Department of Labor (DOL) determines these states. Income tax forms If you paid any wages that are subject to the unemployment compensation laws in any credit reduction state, your federal unemployment (FUTA) tax credit is reduced. Income tax forms See the Instructions for Schedule H (Form 1040) for more information. Income tax forms Outsourcing payroll duties. Income tax forms  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Income tax forms The employer remains responsible if the third party fails to perform any required action. Income tax forms If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Income tax forms gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Income tax forms Photographs of missing children. Income tax forms  The IRS is a proud partner with the National Center for Missing and Exploited Children. Income tax forms Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Income tax forms You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Income tax forms Introduction The information in this publication applies to you only if you have a household employee. Income tax forms If you have a household employee in 2014, you may need to pay state and federal employment taxes for 2014. Income tax forms You generally must add your federal employment taxes to the income tax that you will report on your 2014 federal income tax return. Income tax forms This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes (social security tax, Medicare tax, FUTA, and federal income tax withholding). Income tax forms It explains how to figure, pay, and report these taxes for your household employee. Income tax forms It also explains what records you need to keep. Income tax forms This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee. Income tax forms Comments and suggestions. Income tax forms   We welcome your comments about this publication and your suggestions for future editions. Income tax forms   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Income tax forms NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Income tax forms Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Income tax forms   You can also send us comments from www. Income tax forms irs. Income tax forms gov/formspubs. Income tax forms Click on More Information and then click on Comment on Tax Forms and Publications. Income tax forms   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Income tax forms Tax questions. Income tax forms   If you have a tax question, check the information available on IRS. Income tax forms gov or call 1-800-829-1040 or 1-800-829-4933 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability at 1-800-829-4059) Monday–Friday from 7:00 a. Income tax forms m. Income tax forms –7:00 p. Income tax forms m. Income tax forms local time (Alaska and Hawaii follow Pacific time). Income tax forms We cannot answer tax questions sent to the above address. Income tax forms Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 28-Feb-2014

The Income Tax Forms

Income tax forms 6. Income tax forms   Insurance Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible PremiumsSelf-Employed Health Insurance Deduction Nondeductible Premiums Capitalized Premiums When To Deduct Premiums What's New Retiree drug subsidy. Income tax forms  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). Income tax forms For more information, see the retiree drug subsidy frequently asked questions on IRS. Income tax forms gov. Income tax forms Introduction You generally can deduct the ordinary and necessary cost of insurance as a business expense if it is for your trade, business, or profession. Income tax forms However, you may have to capitalize certain insurance costs under the uniform capitalization rules. Income tax forms For more information, see Capitalized Premiums , later. Income tax forms Topics - This chapter discusses: Deductible premiums Nondeductible premiums Capitalized premiums When to deduct premiums Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 538 Accounting Periods and Methods 547 Casualties, Disasters, and Thefts Form (and Instructions) 1040 U. Income tax forms S. Income tax forms Individual Income Tax Return See chapter 12 for information about getting publications and forms. Income tax forms Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. Income tax forms Insurance that covers fire, storm, theft, accident, or similar losses. Income tax forms Credit insurance that covers losses from business bad debts. Income tax forms Group hospitalization and medical insurance for employees, including long-term care insurance. Income tax forms If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. Income tax forms If an S corporation pays accident and health insurance premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages subject to federal income tax withholding. Income tax forms See Publication 15-B. Income tax forms Liability insurance. Income tax forms Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Income tax forms Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Income tax forms If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. Income tax forms If an S corporation pays workers' compensation premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages. Income tax forms Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Income tax forms Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Income tax forms Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Income tax forms If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Income tax forms If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Income tax forms Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. Income tax forms Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Income tax forms Self-Employed Health Insurance Deduction You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. Income tax forms The insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Income tax forms A child includes your son, daughter, stepchild, adopted child, or foster child. Income tax forms A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Income tax forms One of the following statements must be true. Income tax forms You were self-employed and had a net profit for the year reported on Schedule C (Form 1040), Profit or Loss From Business; Schedule C-EZ (Form 1040), Net Profit From Business; or Schedule F (Form 1040), Profit or Loss From Farming. Income tax forms You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Income tax forms , box 14, code A. Income tax forms You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. Income tax forms You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Income tax forms Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. Income tax forms The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. Income tax forms For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual. Income tax forms For partners, a policy can be either in the name of the partnership or in the name of the partner. Income tax forms You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Income tax forms However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Income tax forms Otherwise, the insurance plan will not be considered to be established under your business. Income tax forms For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. Income tax forms You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. Income tax forms However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Income tax forms Otherwise, the insurance plan will not be considered to be established under your business. Income tax forms Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Income tax forms If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. Income tax forms For more information, see Form 1040X, Amended U. Income tax forms S. Income tax forms Individual Income Tax Return. Income tax forms Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. Income tax forms Take the deduction on Form 1040, line 29. Income tax forms Qualified long-term care insurance. Income tax forms   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. Income tax forms But, for each person covered, you can include only the smaller of the following amounts. Income tax forms The amount paid for that person. Income tax forms The amount shown below. Income tax forms Use the person's age at the end of the tax year. Income tax forms Age 40 or younger–$360 Age 41 to 50–$680 Age 51 to 60–$1,360 Age 61 to 70–$3,640 Age 71 or older–$4,550 Qualified long-term care insurance contract. Income tax forms   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. Income tax forms The contract must meet all the following requirements. Income tax forms It must be guaranteed renewable. Income tax forms It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits. Income tax forms It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. Income tax forms It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Income tax forms Qualified long-term care services. Income tax forms   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. Income tax forms The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. Income tax forms Worksheet 6-A. Income tax forms Self-Employed Health Insurance Deduction Worksheet Note. Income tax forms Use a separate worksheet for each trade or business under which an insurance plan is established. Income tax forms 1. Income tax forms Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. Income tax forms Your insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Income tax forms But do not include the following. Income tax forms   Amounts for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Income tax forms Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. Income tax forms Any amounts you included on Form 8885, line 4. Income tax forms Any qualified health insurance premiums you paid to “U. Income tax forms S. Income tax forms Treasury-HCTC. Income tax forms ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Income tax forms Any payments for qualified long-term care insurance (see line 2) 1. Income tax forms   2. Income tax forms For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. Income tax forms       a) Total payments made for that person during the year. Income tax forms       b) The amount shown below. Income tax forms Use the person's age at the end of the tax year. Income tax forms         $360— if that person is age 40 or younger          $680— if age 41 to 50         $1,360— if age 51 to 60         $3,640— if age 61 to 70         $4,550— if age 71 or older         Do not include payments for any month you were eligible to participate in a long-term care insurance plan subsidized by your or your spouse’s employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Income tax forms If more than one person is covered, figure separately the amount to enter for each person. Income tax forms Then enter the total of those amounts 2. Income tax forms   3. Income tax forms Add lines 1 and 2 3. Income tax forms   4. Income tax forms Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. Income tax forms Do not include Conservation Reserve Program payments exempt from self-employment tax. Income tax forms If the business is an S corporation, skip to line 11 4. Income tax forms   5. Income tax forms Enter the total of all net profits* from: Schedule C (Form 1040), line 31; Schedule C-EZ (Form 1040), line 3; Schedule F (Form 1040), line 34; or Schedule K-1 (Form 1065), box 14, code A; plus any other income allocable to the profitable businesses. Income tax forms Do not include Conservation Reserve Program payments exempt from self-employment tax. Income tax forms See the Instructions for Schedule SE (Form 1040). Income tax forms Do not include any net losses shown on these schedules. Income tax forms 5. Income tax forms   6. Income tax forms Divide line 4 by line 5 6. Income tax forms   7. Income tax forms Multiply Form 1040, line 27, by the percentage on line 6 7. Income tax forms   8. Income tax forms Subtract line 7 from line 4 8. Income tax forms   9. Income tax forms Enter the amount, if any, from Form 1040, line 28, attributable to the same trade or business in which the insurance plan is established 9. Income tax forms   10. Income tax forms Subtract line 9 from line 8 10. Income tax forms   11. Income tax forms Enter your Medicare wages (Form W-2, box 5) from an S corporation in which you are a more-than-2% shareholder and in which the insurance plan is established 11. Income tax forms   12. Income tax forms Enter any amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or any amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above 12. Income tax forms   13. Income tax forms Subtract line 12 from line 10 or 11, whichever applies 13. Income tax forms   14. Income tax forms Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Income tax forms Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). Income tax forms 14. Income tax forms   * If you used either optional method to figure your net earnings from self-employment from any business, do not enter your net profit from the business. Income tax forms Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. Income tax forms * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. Income tax forms However, it does not include capital gain income. Income tax forms Chronically ill individual. Income tax forms   A chronically ill individual is a person who has been certified as one of the following. Income tax forms An individual who has been unable, due to loss of functional capacity for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual. Income tax forms Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. Income tax forms An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Income tax forms The certification must have been made by a licensed health care practitioner within the previous 12 months. Income tax forms Benefits received. Income tax forms   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. Income tax forms Other coverage. Income tax forms   You cannot take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you did not actually participate. Income tax forms In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2013, do not use amounts paid for coverage for that month to figure the deduction. Income tax forms   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. Income tax forms However, any medical insurance payments not deductible on Form 1040, line 29, can be included as medical expenses on Schedule A (Form 1040), Itemized Deductions, if you itemize deductions. Income tax forms Effect on itemized deductions. Income tax forms   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. Income tax forms Effect on self-employment tax. Income tax forms   For tax years beginning before or after 2010, you cannot subtract the self-employed health insurance deduction when figuring net earnings for your self-employment tax from the business under which the insurance plan is established, or considered to be established as discussed earlier. Income tax forms For more information, see Schedule SE (Form 1040). Income tax forms How to figure the deduction. Income tax forms   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Income tax forms However, if any of the following apply, you must use Worksheet 6-A in this chapter. Income tax forms You had more than one source of income subject to self-employment tax. Income tax forms You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Income tax forms You are using amounts paid for qualified long-term care insurance to figure the deduction. Income tax forms If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. Income tax forms Health coverage tax credit. Income tax forms   You may be able to take this credit only if you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment trade adjustment assistance (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient. Income tax forms Use Form 8885 to figure the amount, if any, of this credit. Income tax forms   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. Income tax forms Any amounts you included on Form 8885, line 4. Income tax forms Any qualified health insurance premiums you paid to “U. Income tax forms S. Income tax forms Treasury-HCTC. Income tax forms ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Income tax forms More than one health plan and business. Income tax forms   If you have more than one health plan during the year and each plan is established under a different business, you must use separate worksheets (Worksheet 6-A) to figure each plan's net earnings limit. Income tax forms Include the premium you paid under each plan on line 1 or line 2 of that separate worksheet and your net profit (or wages) from that business on line 4 (or line 11). Income tax forms For a plan that provides long-term care insurance, the total of the amounts entered for each person on line 2 of all worksheets cannot be more than the appropriate limit shown on line 2 for that person. Income tax forms Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. Income tax forms Self-insurance reserve funds. Income tax forms You cannot deduct amounts credited to a reserve set up for self-insurance. Income tax forms This applies even if you cannot get business insurance coverage for certain business risks. Income tax forms However, your actual losses may be deductible. Income tax forms See Publication 547. Income tax forms Loss of earnings. Income tax forms You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. Income tax forms However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. Income tax forms Certain life insurance and annuities. Income tax forms For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Income tax forms You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Income tax forms A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Income tax forms For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Income tax forms The disallowance applies without regard to whom the policy covers. Income tax forms Partners. Income tax forms If, as a partner in a partnership, you take out an insurance policy on your own life and name your partners as beneficiaries to induce them to retain their investments in the partnership, you are considered a beneficiary. Income tax forms You cannot deduct the insurance premiums. Income tax forms Insurance to secure a loan. Income tax forms If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Income tax forms Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Income tax forms In the event of death, the proceeds of the policy are generally not taxed as income even if they are used to liquidate the debt. Income tax forms Capitalized Premiums Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Income tax forms Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Income tax forms You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Income tax forms Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. Income tax forms Uniform capitalization rules. Income tax forms   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Income tax forms Produce real property or tangible personal property. Income tax forms For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Income tax forms Acquire property for resale. Income tax forms However, these rules do not apply to the following property. Income tax forms Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Income tax forms Property you produce if you meet either of the following conditions. Income tax forms Your indirect costs of producing the property are $200,000 or less. Income tax forms You use the cash method of accounting and do not account for inventories. Income tax forms More information. Income tax forms   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Income tax forms When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. Income tax forms Cash method. Income tax forms   If you use the cash method of accounting, you generally deduct insurance premiums in the tax year you actually paid them, even if you incurred them in an earlier year. Income tax forms However, see Prepayment , later. Income tax forms Accrual method. Income tax forms   If you use an accrual method of accounting, you cannot deduct insurance premiums before the tax year in which you incur a liability for them. Income tax forms In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). Income tax forms For more information about the accrual method of accounting, see chapter 1. Income tax forms For information about the exception for recurring items, see Publication 538. Income tax forms Prepayment. Income tax forms   You cannot deduct expenses in advance, even if you pay them in advance. Income tax forms This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Income tax forms   Expenses such as insurance are generally allocable to a period of time. Income tax forms You can deduct insurance expenses for the year to which they are allocable. Income tax forms Example. Income tax forms In 2013, you signed a 3-year insurance contract. Income tax forms Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Income tax forms You can deduct in 2014 and 2015 the premium allocable to those years. Income tax forms Dividends received. Income tax forms   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. Income tax forms For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. Income tax forms Prev  Up  Next   Home   More Online Publications