Being an independent insurance agent comes with numerous benefits. Still, it also means you need to be familiar with all the tax laws, so that you can file your taxes properly and maximize deductions. This can be stressful and confusing, especially for those who are new in the business. We have listed some tax tips to help you get through the tax season.
Hire a CPA
The safest thing to do come tax season is hire a CPA (Certified Public Accountant). These professionals differ from other accountants in that they have gone through an extensive education program and are licensed by the state. A CPA is required to keep up with any tax law updates, so they will always be aware of any changes that might affect you personally. Do some research online or ask for recommendations from your colleagues. You want to find someone who has experience working with adjusters.
Work as an S-Corporation
The Qualified Business Income Deduction (QBID) from 2017 has benefited independent adjusters by adjusting tax percentages in their favor. Now, many adjusters chose to function as sole proprietors or S-corporations to reap additional tax benefits. Research the different business structures, as well as their benefits before choosing your own.
Tax Deductions for Adjusters
To determine your tax deductions during tax season, you need to keep a neat record of all your business expenses. According to the IRS, all your expenses need to be ordinary and necessary to qualify for deductions. Here are the records you should keep for these purposes:
Keep records of all your travel expenses, including tickets, parking fees, diesel, hotel bookings, meals, etc. List these on Schedule C and Form 2106.
Any educational expenses pertaining to your current career path may qualify for deductions, including any courses, licenses, renewals, certifications, books, etc. Bear in mind that educational costs unrelated to your career as an adjuster do not qualify. Use Schedule A.
Any costs pertaining to your office space can be deducted. They include rent, maintenance expenses, repairs, utilities, cleaning, etc. Use Schedule A, Schedule C, and Form 8829 to determine these deductions.
You can get a deduction for office supplies expenses, including pens, paper, software, computers, printers, etc. Use Schedule C.
Last but not least, you can deduct your insurance expenses, including life, auto, health insurance, and others. For insurance purposes, use Form 1040, Schedule A, and Form 2106.
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