QandAs: Finance

Can I Deduct Life Insurance Premiums as a Business Expense?

Answer:
According to the IRS, you may claim life insurance covering your employees as a business expense so long as you are not directly or indirectly a beneficiary under the contract.

For example, if you pay for life insurance for your employees and hold no interest in the death benefit, this is a legitimate business expense.

However, if you are directly or indirectly a beneficiary, you may not deduct life insurance premiums. The IRS has two sets of rules for this based on the date of the contract. For life insurance contracts issued prior to June 9, 1997, you may not deduct life insurance premiums for yourself, an employee, or any other person with a financial interest (such as an owner, part owner, or lender) in your organization. You are considered a possible beneficiary if the named insured owes you money which would be repaid using the policy’s proceeds.

Policies issued after June 8, 1997, you cannot deduct life insurance premiums if you are directly or indirectly a beneficiary regardless of whom the policy covers.


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