Tax Basics for Innkeepers

Tax Day is quickly approaching. To help reduce the stress and nerves you may have going into this tax season, we are diving in deep about what innkeeper owners need to know when it comes to paying taxes in the U.S. and the deductions they may be eligible for.

Handling W-2 Incomes

If your business runs payroll, you are most likely dealing with W-2 income. As an employer, you’re responsible for deducting the appropriate amount of taxes from each paycheck and sending them to the government. A payroll provider can help you determine how much to take out and send it to the tax authorities on your behalf.  It’s a wise idea to have an accountant double-check that your payroll W-2 deductions are what they should be, as tax laws are constantly changing and may require updates.

Determining Quarterly Taxes for Inns

Generally, if you’re expected to owe a tax of $1,000 or more when your tax return is filed, you will have to make quarterly tax payments. Depending on where you live and where you operate your inn business you will need to pay taxes to the federal government and the state. To find out more about quarterly estimated tax payments, visit the IRS Estimated Taxes Guide.

Learn What Is and Isn’t Tax Deductible

Depending on what purchases you make for your innkeeper business, you may be able to write off a few things such as insurance. As always, make sure to discuss any deductions with a tax professional.

Is Business Insurance Tax Deductible?

Navigating the tax code can be complex for businesses of all sizes and sectors. Specifically, business owners may question whether their business insurance is tax deductible. In general, the answer is yes. According to the IRS, business owners can deduct ordinary and necessary business expenses. This means that several types of commercial insurance premiums are deductible.

Deductible Premiums

The following types of business insurance premiums can typically be deducted:

Commercial property insurance: This coverage can help pay for repair or replacement costs if a business owner’s commercial property gets damaged by a covered event (e.g., fire, theft and vandalism).

General liability insurance: This coverage may assist with the resulting expenses if a business owner is held responsible for third-party injuries or property damage.

Cyber insurance: This coverage can help pay for losses a business owner may face due to data breaches or other cybersecurity incidents, including notification and recovery costs.

Business interruption insurance: This coverage may assist with lost income and ongoing expenses if a business owner is forced to temporarily close their doors due to a covered incident.

Professional liability insurance: This coverage can help pay for the resulting costs if a client or customer claims a business owner’s services were negligent or otherwise inadequate.

Commercial auto insurance: This coverage can help pay for losses a business owner may encounter following accidents or other damages stemming from their use of commercial vehicles.

Other types of insurance that can be deducted include employee health and life insurance premiums. Additionally, state unemployment insurance fund contributions may be deductible as taxes depending on applicable state laws.

Nondeductible Premiums

Some business insurance premiums generally cannot be deducted, such as:

• Loss of earnings insurance that can help pay for lost income due to a business owner’s sickness or disability.
• Life insurance where a business owner is directly or indirectly included as the policy’s beneficiary.

Funds placed into a self-insurance reserve are also nondeductible.

CBIZ Innkeepers Insurance — A Great Asset to Your Business

There are several nuances regarding tax filings and inn owners need to ensure they adhere to applicable regulations. Consult a trusted tax professional to learn more and determine which expenses can be written off.

For additional safety guidance and insurance solutions for your inn business, connect with a member of our team.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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