When it comes to running a business, knowing which expenses are deductible can help you save money. The same applies to life insurance. So, what are the rules when it comes to life insurance deductions for S Corps? Here’s what you need to know:
Deductible Life Insurance Expenses
Certain life insurance expenses may be deductible for a business, depending on the type of coverage and how it is used. These deductible expenses may include:
- Premiums for key employee life insurance: Premiums for life insurance covering one or more key employees can be deductible if used as an employee benefit.
- Premiums for owner-employee life insurance: Premiums for life insurance policies covering a sole shareholder/employee of an S Corp are deductible.
Non-Deductible Life Insurance Expenses
While certain life insurance expenses may be deductible, other expenses are not. Examples of expenses that are not deductible include premiums for policies that cover:
- Employees in general, and not just key employees
- Non-employee shareholders
- Creditors, lenders or other third-party beneficiaries
It’s important to note that any life insurance premiums paid for personal policies are not tax deductible.
In general, life insurance expenses for S Corps can be tax deductible, but they must meet certain criteria. Be sure to consult with a tax advisor to determine your eligibility for tax deductions.