December 09, 2015
The determination of whether insurance leads are tax deductible or not is largely dependent on the type of organization that you work with, how it is structured and who pays for the insurance lead. It is important to keep in mind, only the person paying for the insurance leads is able to take the deduction. If you are paying for the leads and being reimbursed for the price of the insurance lead or insurance call, you are not eligible to take a deduction.
In most insurance offices, producers or agents are compensated as independent contractors. In this type of business relationship, if the producer or agent is purchasing the insurance leads or insurance calls directly from a lead company, then it would be considered a business expense and as such you are able to take a tax deduction, which reduces the amount of money you effectively make by the price of the lead, thereby reducing your tax liability. If the producer or agent is purchasing the lead from the business owner, then it would also be deductible.
If the owner or head agent is purchasing the leads and providing to an independent contractor for free’, the owner or head agent is able to take the deduction. If the owner or head agent, reduces your commission by the amount of the lead, then you are not able to take a separate deduction since you are effectively reducing your revenue or commission by the price of the lead.
If you are an employee of an agency and the owner or head agent is purchasing the lead and charging you for them, you may also be eligible to deduct the price of the leads. If you are an employee and are purchasing additional leads, to help with your sales, and no one is reimbursing you for the price of the lead, you too may be able to deduct the price of the insurance lead. If the owner is purchasing the leads and paying you to contact them, the owner is able to take the deduction.
If you participate in a co-op program or another program sponsored by your carrier, and you are reimbursed for marketing expenses or insurance lead purchases, it is important that you ONLY deduct the amount that you are not reimbursed.
Keeping accurate records of your lead purchases is extremely important to make sure you can take all allowable deductions. You should make sure your insurance lead company or agency owner is providing you with timely and accurate documentation. You should also keep in mind that lead expense deductions can only be taken in the year that you spent the money and received the lead, if you are pre-paying for leads, you may not be eligible to take the expense in the current year (you should consult your tax professional). Without proper documentation of your insurance lead expenses, you put yourself at risk, if you are ever audited.
Whenever you have questions about whether something is tax deductible or not, it is always best to consult the IRS website (https://www.irs.gov/) or a tax professional. You should also contact your state department of revenue, since the rules can vary substantially by state.
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