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Tax Forms 2011 1040

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Tax Forms 2011 1040

Tax forms 2011 1040 Index A Adjusted basis: Adoption tax benefits, Adoption Tax Benefits Assessment for local improvements, Assessments for Local Improvements Canceled debt, Canceled Debt Excluded From Income Casualty and theft losses, Casualties and Thefts Credit for qualified electric vehicles, Vehicle Credits Decreases to, Decreases to Basis Depreciation, Depreciation Easements, Easements Employer-provided child care, Employer-Provided Child Care Example, Adjustments to Basis Example Gain from sale of home, Postponed Gain From Sale of Home Gas-guzzler tax, Gas-Guzzler Tax Increases to, Increases to Basis Section 179 deduction, Section 179 Deduction Subsidies for energy conservation, Exclusion of Subsidies for Energy Conservation Measures Adoption tax benefits, Adoption Tax Benefits Allocating basis, Allocating the Basis Assistance (see Tax help) Assumption of mortgage, Assumption of mortgage. Tax forms 2011 1040 B Business acquired, Trade or Business Acquired Business assets, Business Assets Businesses exchanged, Exchange of business property. Tax forms 2011 1040 C Canceled debt, Canceled Debt Excluded From Income Casualty and theft losses, Casualties and Thefts Change to business use, Property Changed to Business or Rental Use Community property, Community Property Constructing assets, Constructing assets. Tax forms 2011 1040 Copyrights, Copyrights. Tax forms 2011 1040 Cost basis: Allocating basis, Allocating the Basis Assumption of mortgage, Assumption of mortgage. Tax forms 2011 1040 Capitalized costs, Activities subject to the rules. Tax forms 2011 1040 , Deducting vs. Tax forms 2011 1040 Capitalizing Costs Loans, low or no interest, Loans with low or no interest. Tax forms 2011 1040 Real estate taxes, Real estate taxes. Tax forms 2011 1040 Real property, Real Property Settlement costs (fees), Settlement costs. Tax forms 2011 1040 D Decreases to basis, Decreases to Basis Demolition of building, Demolition of building. Tax forms 2011 1040 Depreciation, Depreciation E Easements, Easements Employer-provided child care, Employer-Provided Child Care Exchanges: Involuntary, Involuntary Conversions Like-kind, Like-Kind Exchanges Nontaxable, Nontaxable Exchanges Partial business use of property, Partial Business Use of Property Taxable, Taxable Exchanges F Fair market value, Fair market value (FMV). Tax forms 2011 1040 Franchises, Franchises, trademarks, and trade names. Tax forms 2011 1040 Free tax services, How To Get Tax Help G Gain from sale of home, Postponed Gain From Sale of Home Gifts, property received, Property Received as a Gift Group of assets acquired, Group of Assets Acquired H Help (see Tax help) I Inherited property, Inherited Property Intangible assets, Intangible Assets Involuntary exchanges, Involuntary Conversions L Land and buildings, Land and Buildings Loans, low or no interest, Loans with low or no interest. Tax forms 2011 1040 M More information (see Tax help) N Nontaxable exchanges: Like-kind, Like-Kind Exchanges Partial, Partially Nontaxable Exchange P Partially nontaxable exchanges, Partially Nontaxable Exchange Patents, Patents. Tax forms 2011 1040 Points, Points. Tax forms 2011 1040 Property changed to business use, Property Changed to Business or Rental Use Property received as a gift, Property Received as a Gift Property received for services: Bargain purchases, Bargain Purchases Fair market value, Property Received for Services Restricted property, Restricted Property Property transferred from a spouse, Property Transferred From a Spouse Publications (see Tax help) R Real estate taxes, Real estate taxes. Tax forms 2011 1040 Real property, Real Property S Settlement costs (fees), Settlement costs. Tax forms 2011 1040 Special-use valuation, Special-use valuation. Tax forms 2011 1040 Spouse, property transferred from, Property Transferred From a Spouse Stocks and bonds, Stocks and Bonds Subdivided lots, Subdivided lots. Tax forms 2011 1040 T Tax help, How To Get Tax Help Taxable exchanges, Taxable Exchanges Taxpayer Advocate, Contacting your Taxpayer Advocate. Tax forms 2011 1040 Trade or business acquired, Trade or Business Acquired Trademarks and trade  names, Franchises, trademarks, and trade names. Tax forms 2011 1040 Trading property (see Exchanges), Taxable Exchanges TTY/TDD information, How To Get Tax Help U Uniform capitalization rules: Activities subject to the rules, Activities subject to the rules. Tax forms 2011 1040 Exceptions, Exceptions. Tax forms 2011 1040 Prev  Up     Home   More Online Publications
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The Tax Forms 2011 1040

Tax forms 2011 1040 6. Tax forms 2011 1040   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. Tax forms 2011 1040  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). Tax forms 2011 1040 For more information, see the retiree drug subsidy frequently asked questions on IRS. Tax forms 2011 1040 gov. Tax forms 2011 1040 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. Tax forms 2011 1040 However, you may have to capitalize certain insurance costs under the uniform capitalization rules. Tax forms 2011 1040 For more information, see Capitalized Premiums , later. Tax forms 2011 1040 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. Tax forms 2011 1040 S. Tax forms 2011 1040 Individual Income Tax Return See chapter 12 for information about getting publications and forms. Tax forms 2011 1040 Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. Tax forms 2011 1040 Insurance that covers fire, storm, theft, accident, or similar losses. Tax forms 2011 1040 Credit insurance that covers losses from business bad debts. Tax forms 2011 1040 Group hospitalization and medical insurance for employees, including long-term care insurance. Tax forms 2011 1040 If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. Tax forms 2011 1040 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. Tax forms 2011 1040 See Publication 15-B. Tax forms 2011 1040 Liability insurance. Tax forms 2011 1040 Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Tax forms 2011 1040 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. Tax forms 2011 1040 If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. Tax forms 2011 1040 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. Tax forms 2011 1040 Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Tax forms 2011 1040 Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Tax forms 2011 1040 Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Tax forms 2011 1040 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. Tax forms 2011 1040 If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Tax forms 2011 1040 Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. Tax forms 2011 1040 Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 A child includes your son, daughter, stepchild, adopted child, or foster child. Tax forms 2011 1040 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. Tax forms 2011 1040 One of the following statements must be true. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 , box 14, code A. Tax forms 2011 1040 You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. Tax forms 2011 1040 You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Tax forms 2011 1040 Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. Tax forms 2011 1040 The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. Tax forms 2011 1040 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. Tax forms 2011 1040 For partners, a policy can be either in the name of the partnership or in the name of the partner. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 Otherwise, the insurance plan will not be considered to be established under your business. Tax forms 2011 1040 For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 Otherwise, the insurance plan will not be considered to be established under your business. Tax forms 2011 1040 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. Tax forms 2011 1040 If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. Tax forms 2011 1040 For more information, see Form 1040X, Amended U. Tax forms 2011 1040 S. Tax forms 2011 1040 Individual Income Tax Return. Tax forms 2011 1040 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. Tax forms 2011 1040 Take the deduction on Form 1040, line 29. Tax forms 2011 1040 Qualified long-term care insurance. Tax forms 2011 1040   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. Tax forms 2011 1040 But, for each person covered, you can include only the smaller of the following amounts. Tax forms 2011 1040 The amount paid for that person. Tax forms 2011 1040 The amount shown below. Tax forms 2011 1040 Use the person's age at the end of the tax year. Tax forms 2011 1040 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. Tax forms 2011 1040   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. Tax forms 2011 1040 The contract must meet all the following requirements. Tax forms 2011 1040 It must be guaranteed renewable. Tax forms 2011 1040 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. Tax forms 2011 1040 It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. Tax forms 2011 1040 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. Tax forms 2011 1040 Qualified long-term care services. Tax forms 2011 1040   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. Tax forms 2011 1040 The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. Tax forms 2011 1040 Worksheet 6-A. Tax forms 2011 1040 Self-Employed Health Insurance Deduction Worksheet Note. Tax forms 2011 1040 Use a separate worksheet for each trade or business under which an insurance plan is established. Tax forms 2011 1040 1. Tax forms 2011 1040 Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. Tax forms 2011 1040 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. Tax forms 2011 1040 But do not include the following. Tax forms 2011 1040   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. Tax forms 2011 1040 Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. Tax forms 2011 1040 Any amounts you included on Form 8885, line 4. Tax forms 2011 1040 Any qualified health insurance premiums you paid to “U. Tax forms 2011 1040 S. Tax forms 2011 1040 Treasury-HCTC. Tax forms 2011 1040 ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Tax forms 2011 1040 Any payments for qualified long-term care insurance (see line 2) 1. Tax forms 2011 1040   2. Tax forms 2011 1040 For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. Tax forms 2011 1040       a) Total payments made for that person during the year. Tax forms 2011 1040       b) The amount shown below. Tax forms 2011 1040 Use the person's age at the end of the tax year. Tax forms 2011 1040         $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. Tax forms 2011 1040 If more than one person is covered, figure separately the amount to enter for each person. Tax forms 2011 1040 Then enter the total of those amounts 2. Tax forms 2011 1040   3. Tax forms 2011 1040 Add lines 1 and 2 3. Tax forms 2011 1040   4. Tax forms 2011 1040 Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. Tax forms 2011 1040 Do not include Conservation Reserve Program payments exempt from self-employment tax. Tax forms 2011 1040 If the business is an S corporation, skip to line 11 4. Tax forms 2011 1040   5. Tax forms 2011 1040 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. Tax forms 2011 1040 Do not include Conservation Reserve Program payments exempt from self-employment tax. Tax forms 2011 1040 See the Instructions for Schedule SE (Form 1040). Tax forms 2011 1040 Do not include any net losses shown on these schedules. Tax forms 2011 1040 5. Tax forms 2011 1040   6. Tax forms 2011 1040 Divide line 4 by line 5 6. Tax forms 2011 1040   7. Tax forms 2011 1040 Multiply Form 1040, line 27, by the percentage on line 6 7. Tax forms 2011 1040   8. Tax forms 2011 1040 Subtract line 7 from line 4 8. Tax forms 2011 1040   9. Tax forms 2011 1040 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. Tax forms 2011 1040   10. Tax forms 2011 1040 Subtract line 9 from line 8 10. Tax forms 2011 1040   11. Tax forms 2011 1040 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. Tax forms 2011 1040   12. Tax forms 2011 1040 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. Tax forms 2011 1040   13. Tax forms 2011 1040 Subtract line 12 from line 10 or 11, whichever applies 13. Tax forms 2011 1040   14. Tax forms 2011 1040 Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Tax forms 2011 1040 Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). Tax forms 2011 1040 14. Tax forms 2011 1040   * 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. Tax forms 2011 1040 Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. Tax forms 2011 1040 * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. Tax forms 2011 1040 However, it does not include capital gain income. Tax forms 2011 1040 Chronically ill individual. Tax forms 2011 1040   A chronically ill individual is a person who has been certified as one of the following. Tax forms 2011 1040 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. Tax forms 2011 1040 Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. Tax forms 2011 1040 An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Tax forms 2011 1040 The certification must have been made by a licensed health care practitioner within the previous 12 months. Tax forms 2011 1040 Benefits received. Tax forms 2011 1040   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. Tax forms 2011 1040 Other coverage. Tax forms 2011 1040   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. Tax forms 2011 1040 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. Tax forms 2011 1040   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. Tax forms 2011 1040 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. Tax forms 2011 1040 Effect on itemized deductions. Tax forms 2011 1040   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. Tax forms 2011 1040 Effect on self-employment tax. Tax forms 2011 1040   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. Tax forms 2011 1040 For more information, see Schedule SE (Form 1040). Tax forms 2011 1040 How to figure the deduction. Tax forms 2011 1040   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Tax forms 2011 1040 However, if any of the following apply, you must use Worksheet 6-A in this chapter. Tax forms 2011 1040 You had more than one source of income subject to self-employment tax. Tax forms 2011 1040 You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Tax forms 2011 1040 You are using amounts paid for qualified long-term care insurance to figure the deduction. Tax forms 2011 1040 If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. Tax forms 2011 1040 Health coverage tax credit. Tax forms 2011 1040   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. Tax forms 2011 1040 Use Form 8885 to figure the amount, if any, of this credit. Tax forms 2011 1040   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. Tax forms 2011 1040 Any amounts you included on Form 8885, line 4. Tax forms 2011 1040 Any qualified health insurance premiums you paid to “U. Tax forms 2011 1040 S. Tax forms 2011 1040 Treasury-HCTC. Tax forms 2011 1040 ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Tax forms 2011 1040 More than one health plan and business. Tax forms 2011 1040   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. Tax forms 2011 1040 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). Tax forms 2011 1040 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. Tax forms 2011 1040 Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. Tax forms 2011 1040 Self-insurance reserve funds. Tax forms 2011 1040 You cannot deduct amounts credited to a reserve set up for self-insurance. Tax forms 2011 1040 This applies even if you cannot get business insurance coverage for certain business risks. Tax forms 2011 1040 However, your actual losses may be deductible. Tax forms 2011 1040 See Publication 547. Tax forms 2011 1040 Loss of earnings. Tax forms 2011 1040 You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. Tax forms 2011 1040 However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. Tax forms 2011 1040 Certain life insurance and annuities. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 The disallowance applies without regard to whom the policy covers. Tax forms 2011 1040 Partners. Tax forms 2011 1040 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. Tax forms 2011 1040 You cannot deduct the insurance premiums. Tax forms 2011 1040 Insurance to secure a loan. Tax forms 2011 1040 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. Tax forms 2011 1040 Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Tax forms 2011 1040 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. Tax forms 2011 1040 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. Tax forms 2011 1040 Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Tax forms 2011 1040 You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Tax forms 2011 1040 Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. Tax forms 2011 1040 Uniform capitalization rules. Tax forms 2011 1040   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. Tax forms 2011 1040 Produce real property or tangible personal property. Tax forms 2011 1040 For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Tax forms 2011 1040 Acquire property for resale. Tax forms 2011 1040 However, these rules do not apply to the following property. Tax forms 2011 1040 Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Tax forms 2011 1040 Property you produce if you meet either of the following conditions. Tax forms 2011 1040 Your indirect costs of producing the property are $200,000 or less. Tax forms 2011 1040 You use the cash method of accounting and do not account for inventories. Tax forms 2011 1040 More information. Tax forms 2011 1040   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Tax forms 2011 1040 When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. Tax forms 2011 1040 Cash method. Tax forms 2011 1040   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. Tax forms 2011 1040 However, see Prepayment , later. Tax forms 2011 1040 Accrual method. Tax forms 2011 1040   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. Tax forms 2011 1040 In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). Tax forms 2011 1040 For more information about the accrual method of accounting, see chapter 1. Tax forms 2011 1040 For information about the exception for recurring items, see Publication 538. Tax forms 2011 1040 Prepayment. Tax forms 2011 1040   You cannot deduct expenses in advance, even if you pay them in advance. Tax forms 2011 1040 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. Tax forms 2011 1040   Expenses such as insurance are generally allocable to a period of time. Tax forms 2011 1040 You can deduct insurance expenses for the year to which they are allocable. Tax forms 2011 1040 Example. Tax forms 2011 1040 In 2013, you signed a 3-year insurance contract. Tax forms 2011 1040 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. Tax forms 2011 1040 You can deduct in 2014 and 2015 the premium allocable to those years. Tax forms 2011 1040 Dividends received. Tax forms 2011 1040   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. Tax forms 2011 1040 For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. Tax forms 2011 1040 Prev  Up  Next   Home   More Online Publications