what year to deduct business insurance premium

Forum|Forum|2 years ago
December 31, 2023
2 replies
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I paid my 2024 self employed liability insurance premium Dec 30 2023. Do I deduct it on my 2023 or 2024 taxes? Also, I purchased a new router for $318. Given the small value should I enter it as an office expense or depreciate it? Thanks

Best answer by Mike9241

What have you done in the past with regard to the 12-month rule. ? If you deducted the prepayment in the year paid (ie in 2022 you deducted the prepayment for 2023 in 2022) in the past you must continue this method. If you didn't, then you deduct it in 2024. If this is your first time having this type of prepayment, you get to choose the year but you are locked into this method for all future years unless you apply for a change in accounting methods. IRS PUB 538

Mike9241

Under the IRS 12-month rule, a taxpayer can deduct a prepaid expense in the current year if the rights or benefits for the taxpayer do not extend beyond the earlier of:

12 months after the right or benefit begins OR
The end of the tax year after the tax year in which payment is made

your ok

as for the $318 show it as supplies or office expense.

arejfourAuthor

Employee

Thank you for your prompt reply. This is a yearly premium. I would rather deduct the premium in 2024. Is that OK? Thanks

Mike9241Answer

arejfourAuthor

Employee

Thank you for your reply. In the last 20 years I can only recall one instance where I paid the premium early, but, in that instance I deducted it in the year it was paid e.g. year 2018 was paid in 2017 and was deducted in 2017. In all other instances the premium was paid and deducted in the year it was due e.g. year 2020 was paid and deducted in 2020. Thanks