Are business life insurance premiums tax deductible in Nevada?

The tax deductibility of business life insurance premiums depends on the structure and purpose of the policy. Nevada's no state income tax environment makes the federal deductibility question the primary consideration.

Group life insurance for employees: premiums paid by an employer for group life coverage are generally deductible as ordinary business expenses under IRC Section 162. The deduction is available for coverage provided to employees (not just owners) up to $50,000 per employee under the standard group life exclusion rule.

Key person insurance: premiums paid on key person life insurance are generally not deductible if the business is the beneficiary. The IRS does not allow a deduction when the business both pays the premium and receives the death benefit.

Buy-sell insurance: premiums paid by the business on policies funding a buy-sell agreement are generally not deductible when the company is also the beneficiary.

Executive bonus plans (Section 162): the business pays premiums as additional compensation to the executive, which is deductible as a compensation expense. The premium is taxable income to the executive.

Nevada businesses benefit from the state's no corporate income tax on the premium amounts. At the federal level, the deductibility of specific arrangements should be reviewed with a CPA or tax attorney. Agents in our network can explain the tax treatment of specific product structures in general terms but recommend tax advisors for definitive guidance. Actual tax outcomes vary by structure and individual circumstances.