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Www hrblock com Part Six -   Cómo Calcular los Impuestos y Créditos Los ocho capítulos de esta sección explican cómo calcular sus impuestos y cómo calcular los impuestos de determinados hijos con ingresos no derivados del trabajo de $2,000 o más. Www hrblock com Explican también créditos tributarios que, a diferencia de las deducciones, se restan directamente de los impuestos y los disminuyen, dólar por dólar. Www hrblock com El capítulo 36 trata sobre el crédito por ingreso del trabajo y el capítulo 37 abarca una amplia gama de otros créditos, como por ejemplo, el crédito por adopción. Www hrblock com Table of Contents 30. Www hrblock com   Cómo Calcular los ImpuestosIntroduction Cómo Calcular los Impuestos Impuesto Mínimo Alternativo (AMT) Impuestos Calculados por el IRS Cómo Presentar la Declaración 31. Www hrblock com   Impuesto sobre Ingresos No Derivados del Trabajo de Determinados Hijos¿Que Hay de Nuevo? Introduction Useful Items - You may want to see: Cómo Saber si se Tiene que Utilizar la Declaración del Padre o de la MadrePadres que no Presentan la Declaración Conjunta Elección de los Padres de Declarar los Intereses y Dividendos del HijoConsecuencias de Incluir los Ingresos del Hijo Cómo Calcular los Ingresos del Hijo Cómo Calcular el Impuesto Adicional Impuesto para Determinados Hijos con Ingresos No Derivados del TrabajoCómo Facilitar Información sobre los Padres (líneas A-C del Formulario 8615) Paso 1. Www hrblock com Cómo Calcular los Ingresos Netos No Derivados del Trabajo del Hijo (Parte I del Formulario 8615) Paso 2. Www hrblock com Cómo Calcular el Impuesto Provisional a la Tasa Impositiva de los Padres (Parte II del Formulario 8615) Paso 3. Www hrblock com Cómo Calcular el Impuesto del Hijo (Parte III del Formulario 8615) 32. Www hrblock com   Crédito por Gastos del Cuidado de Menores y DependientesRecordatorios Introduction Useful Items - You may want to see: Requisitos Para Reclamar el CréditoRequisitos de la Persona Calificada Requisito del Ingreso del Trabajo Requisito de Gastos Relacionados con el Trabajo Requisito de la Declaración Conjunta Requisito de Identificación del Proveedor de Cuidados Cómo Calcular el CréditoCómo Calcular el Total de los Gastos Relacionados con el Trabajo Límite del Ingreso del Trabajo Límite de Dinero Cantidad de Crédito Cómo Reclamar el CréditoCrédito tributario no reembolsable. Www hrblock com Impuestos sobre la Nómina para Empleadores de Empleados Domésticos 33. Www hrblock com   Crédito para Ancianos o Personas IncapacitadasIntroduction Useful Items - You may want to see: ¿Reúne los Requisitos del Crédito?Persona que Reúne los Requisitos Límites sobre los Ingresos Cómo Reclamar el CréditoEl Crédito Calculado por el IRS El Crédito Calculado por Usted Mismo 34. Www hrblock com   Crédito Tributario por HijosIntroduction Useful Items - You may want to see: Hijo Calificado Cantidad de CréditoLímites del Crédito Cómo Reclamar el Crédito Crédito Tributario Adicional por Hijos Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040)Parte I Partes II a IV 35. Www hrblock com   Créditos Tributarios por EstudiosIntroduction Useful Items - You may want to see: ¿Quién Puede Reclamar un Crédito Tributario por Estudios? Gastos de Estudios CalificadosNo se Permite Beneficio Doble Ajustes a los Gastos de Estudios Calificados 36. Www hrblock com   Crédito por Ingreso del Trabajo (EIC) Qué Hay de Nuevo Recordatorios Introduction Useful Items - You may want to see: ¿Reúne los Requisitos para el Crédito?Si se Hizo una Solicitud Indebida del Crédito en un Año Anterior Parte A. Www hrblock com Requisitos para TodosRequisito 1. Www hrblock com Tiene que Tener Ingresos Brutos Ajustados Inferiores a: Requisito 2. Www hrblock com Tiene que tener un número de Seguro Social válido Requisito 3. Www hrblock com Su Estado Civil para Efectos de la Declaración no Puede Ser Casado que Presenta la Declaración por Separado Requisito 4. Www hrblock com Tiene que Ser Ciudadano o Extranjero Residente de los Estados Unidos Durante Todo el Año Requisito 5. Www hrblock com No Puede Presentar el Formulario 2555 ni el Formulario 2555-EZ Requisito 6. Www hrblock com Tiene que Tener Ingresos de Inversiones de $3,300 o Menos Requisito 7. Www hrblock com Tiene que Haber Recibido Ingresos del Trabajo Parte B. Www hrblock com Requisitos si Tiene un Hijo CalificadoRequisito 8. Www hrblock com Su Hijo Tiene que Cumplir los Requisitos de Parentesco, Edad, Residencia y de la Declaración Conjunta Requisito 9. Www hrblock com Para Reclamar el Crédito por Ingreso del Trabajo, Sólo una Persona Puede Basarse en el Hijo Calificado de Usted Requisito 10. Www hrblock com Otro Contribuyente no Puede Reclamarlo a Usted como Hijo Calificado Parte C. Www hrblock com Requisitos si no Tiene un Hijo CalificadoRequisito 11. Www hrblock com Tiene que Tener por lo Menos 25 Años pero Menos de 65 Años Requisito 12. Www hrblock com No Puede Ser el Dependiente de Otra Persona Requisito 13. Www hrblock com Otro Contribuyente no Puede Reclamarlo a Usted como Hijo Calificado Requisito 14. Www hrblock com Tiene que Haber Vivido en los Estados Unidos durante más de la Mitad del Año Parte D. Www hrblock com Cómo Calcular y Reclamar el Crédito por Ingreso del TrabajoRequisito 15. Www hrblock com Su Ingreso del Trabajo Tiene que Ser Menos de: El IRS Puede Calcularle el Crédito por Ingreso del Trabajo Cómo Calcular Usted Mismo el Crédito por Ingreso del Trabajo EjemplosEjemplo 1. Www hrblock com Juan y Julia Martínez (Formulario 1040A) Ejemplo 2. Www hrblock com Carla Robles (Formulario 1040EZ) 37. Www hrblock com   Otros CréditosQué Hay de Nuevo Introduction Useful Items - You may want to see: Créditos no ReembolsablesCrédito por Adopción Crédito por Vehículo Motorizado Alternativo Crédito por Bienes de Reabastecimiento de Vehículos con Combustible Alternativo Crédito para Titulares de Bonos de Crédito Tributario Crédito por Impuestos Extranjeros Crédito por Intereses Hipotecarios Crédito no Reembolsable del Impuesto Mínimo de Años Anteriores Crédito por Vehículos Enchufables con Motor de Dirección Eléctrica Créditos por Energía de la Propiedad Residencial Crédito por Aportaciones a Cuentas de Ahorro para la Jubilación (Crédito del Ahorrador) Créditos ReembolsablesCrédito por el Impuesto sobre Ganancias de Capital no Distribuidas Crédito Tributario por Cobertura del Seguro Médico Crédito por Retención en Exceso del Impuesto del Seguro Social o del Impuesto de la Jubilación Ferroviaria Prev  Up  Next   Home   More Online Publications
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Www hrblock com 6. Www hrblock com   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. Www hrblock com  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). Www hrblock com For more information, see the retiree drug subsidy frequently asked questions on IRS. Www hrblock com gov. Www hrblock com 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. Www hrblock com However, you may have to capitalize certain insurance costs under the uniform capitalization rules. Www hrblock com For more information, see Capitalized Premiums , later. Www hrblock com 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. Www hrblock com S. Www hrblock com Individual Income Tax Return See chapter 12 for information about getting publications and forms. Www hrblock com Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. Www hrblock com Insurance that covers fire, storm, theft, accident, or similar losses. Www hrblock com Credit insurance that covers losses from business bad debts. Www hrblock com Group hospitalization and medical insurance for employees, including long-term care insurance. Www hrblock com If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. Www hrblock com 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. Www hrblock com See Publication 15-B. Www hrblock com Liability insurance. Www hrblock com Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Www hrblock com 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. Www hrblock com If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. Www hrblock com 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. Www hrblock com Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Www hrblock com Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Www hrblock com Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Www hrblock com 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. Www hrblock com If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Www hrblock com Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. Www hrblock com Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Www hrblock com 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. Www hrblock com 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. Www hrblock com A child includes your son, daughter, stepchild, adopted child, or foster child. Www hrblock com 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. Www hrblock com One of the following statements must be true. Www hrblock com 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. Www hrblock com 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. Www hrblock com , box 14, code A. Www hrblock com You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. Www hrblock com You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Www hrblock com Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. Www hrblock com The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. Www hrblock com 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. Www hrblock com For partners, a policy can be either in the name of the partnership or in the name of the partner. Www hrblock com 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. Www hrblock com 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. Www hrblock com Otherwise, the insurance plan will not be considered to be established under your business. Www hrblock com For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. Www hrblock com 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. Www hrblock com 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. Www hrblock com Otherwise, the insurance plan will not be considered to be established under your business. Www hrblock com 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. Www hrblock com If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. Www hrblock com For more information, see Form 1040X, Amended U. Www hrblock com S. Www hrblock com Individual Income Tax Return. Www hrblock com 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. Www hrblock com Take the deduction on Form 1040, line 29. Www hrblock com Qualified long-term care insurance. Www hrblock com   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. Www hrblock com But, for each person covered, you can include only the smaller of the following amounts. Www hrblock com The amount paid for that person. Www hrblock com The amount shown below. Www hrblock com Use the person's age at the end of the tax year. Www hrblock com 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. Www hrblock com   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. Www hrblock com The contract must meet all the following requirements. Www hrblock com It must be guaranteed renewable. Www hrblock com 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. Www hrblock com It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. Www hrblock com 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. Www hrblock com Qualified long-term care services. Www hrblock com   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. Www hrblock com The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. Www hrblock com Worksheet 6-A. Www hrblock com Self-Employed Health Insurance Deduction Worksheet Note. Www hrblock com Use a separate worksheet for each trade or business under which an insurance plan is established. Www hrblock com 1. Www hrblock com Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. Www hrblock com 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. Www hrblock com But do not include the following. Www hrblock com   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. Www hrblock com Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. Www hrblock com Any amounts you included on Form 8885, line 4. Www hrblock com Any qualified health insurance premiums you paid to “U. Www hrblock com S. Www hrblock com Treasury-HCTC. Www hrblock com ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Www hrblock com Any payments for qualified long-term care insurance (see line 2) 1. Www hrblock com   2. Www hrblock com For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. Www hrblock com       a) Total payments made for that person during the year. Www hrblock com       b) The amount shown below. Www hrblock com Use the person's age at the end of the tax year. Www hrblock com         $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. Www hrblock com If more than one person is covered, figure separately the amount to enter for each person. Www hrblock com Then enter the total of those amounts 2. Www hrblock com   3. Www hrblock com Add lines 1 and 2 3. Www hrblock com   4. Www hrblock com Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. Www hrblock com Do not include Conservation Reserve Program payments exempt from self-employment tax. Www hrblock com If the business is an S corporation, skip to line 11 4. Www hrblock com   5. Www hrblock com 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. Www hrblock com Do not include Conservation Reserve Program payments exempt from self-employment tax. Www hrblock com See the Instructions for Schedule SE (Form 1040). Www hrblock com Do not include any net losses shown on these schedules. Www hrblock com 5. Www hrblock com   6. Www hrblock com Divide line 4 by line 5 6. Www hrblock com   7. Www hrblock com Multiply Form 1040, line 27, by the percentage on line 6 7. Www hrblock com   8. Www hrblock com Subtract line 7 from line 4 8. Www hrblock com   9. Www hrblock com 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. Www hrblock com   10. Www hrblock com Subtract line 9 from line 8 10. Www hrblock com   11. Www hrblock com 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. Www hrblock com   12. Www hrblock com 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. Www hrblock com   13. Www hrblock com Subtract line 12 from line 10 or 11, whichever applies 13. Www hrblock com   14. Www hrblock com Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Www hrblock com Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). Www hrblock com 14. Www hrblock com   * 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. Www hrblock com Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. Www hrblock com * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. Www hrblock com However, it does not include capital gain income. Www hrblock com Chronically ill individual. Www hrblock com   A chronically ill individual is a person who has been certified as one of the following. Www hrblock com 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. Www hrblock com Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. Www hrblock com An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Www hrblock com The certification must have been made by a licensed health care practitioner within the previous 12 months. Www hrblock com Benefits received. Www hrblock com   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. Www hrblock com Other coverage. Www hrblock com   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. Www hrblock com 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. Www hrblock com   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. Www hrblock com 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. Www hrblock com Effect on itemized deductions. Www hrblock com   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. Www hrblock com Effect on self-employment tax. Www hrblock com   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. Www hrblock com For more information, see Schedule SE (Form 1040). Www hrblock com How to figure the deduction. Www hrblock com   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Www hrblock com However, if any of the following apply, you must use Worksheet 6-A in this chapter. Www hrblock com You had more than one source of income subject to self-employment tax. Www hrblock com You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Www hrblock com You are using amounts paid for qualified long-term care insurance to figure the deduction. Www hrblock com If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. Www hrblock com Health coverage tax credit. Www hrblock com   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. Www hrblock com Use Form 8885 to figure the amount, if any, of this credit. Www hrblock com   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. Www hrblock com Any amounts you included on Form 8885, line 4. Www hrblock com Any qualified health insurance premiums you paid to “U. Www hrblock com S. Www hrblock com Treasury-HCTC. Www hrblock com ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Www hrblock com More than one health plan and business. Www hrblock com   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. Www hrblock com 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). Www hrblock com 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. Www hrblock com Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. Www hrblock com Self-insurance reserve funds. Www hrblock com You cannot deduct amounts credited to a reserve set up for self-insurance. Www hrblock com This applies even if you cannot get business insurance coverage for certain business risks. Www hrblock com However, your actual losses may be deductible. Www hrblock com See Publication 547. Www hrblock com Loss of earnings. Www hrblock com You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. Www hrblock com However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. Www hrblock com Certain life insurance and annuities. Www hrblock com 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. Www hrblock com 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. Www hrblock com 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. Www hrblock com 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. Www hrblock com The disallowance applies without regard to whom the policy covers. Www hrblock com Partners. Www hrblock com 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. Www hrblock com You cannot deduct the insurance premiums. Www hrblock com Insurance to secure a loan. Www hrblock com 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. Www hrblock com Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Www hrblock com 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. Www hrblock com 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. Www hrblock com Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Www hrblock com You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Www hrblock com Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. Www hrblock com Uniform capitalization rules. Www hrblock com   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. Www hrblock com Produce real property or tangible personal property. Www hrblock com For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Www hrblock com Acquire property for resale. Www hrblock com However, these rules do not apply to the following property. Www hrblock com Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Www hrblock com Property you produce if you meet either of the following conditions. Www hrblock com Your indirect costs of producing the property are $200,000 or less. Www hrblock com You use the cash method of accounting and do not account for inventories. Www hrblock com More information. Www hrblock com   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Www hrblock com When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. Www hrblock com Cash method. Www hrblock com   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. Www hrblock com However, see Prepayment , later. Www hrblock com Accrual method. Www hrblock com   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. Www hrblock com In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). Www hrblock com For more information about the accrual method of accounting, see chapter 1. Www hrblock com For information about the exception for recurring items, see Publication 538. Www hrblock com Prepayment. Www hrblock com   You cannot deduct expenses in advance, even if you pay them in advance. Www hrblock com 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. Www hrblock com   Expenses such as insurance are generally allocable to a period of time. Www hrblock com You can deduct insurance expenses for the year to which they are allocable. Www hrblock com Example. Www hrblock com In 2013, you signed a 3-year insurance contract. Www hrblock com 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. Www hrblock com You can deduct in 2014 and 2015 the premium allocable to those years. Www hrblock com Dividends received. Www hrblock com   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. Www hrblock com For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. Www hrblock com Prev  Up  Next   Home   More Online Publications