Can businesses deduct insurance premiums on taxes?

Deducting Business Insurance Premiums on Taxes in New Mexico

Businesses operating in New Mexico can generally deduct insurance premiums as a business expense on their federal and state tax returns. This includes a variety of insurance types that are necessary and ordinary for business operations.

Types of Deductible Insurance Premiums

• General Liability Insurance: Premiums for protecting against third-party claims.
• Property Insurance: Coverage for business property and equipment.
• Workers' Compensation Insurance: Required for most New Mexico employers to cover employee injuries.
• Professional Liability Insurance: Also known as errors and omissions insurance.
• Business Auto Insurance: For vehicles used in business operations.

Operational Considerations

To maximize deductions and maintain compliance, businesses should:

• Keep detailed recordkeeping of all insurance premium payments and related documents.
• Classify insurance expenses accurately in bookkeeping systems to streamline tax reporting.
• Review insurance policies annually to ensure coverage aligns with business risks and operational changes.
• Consult with a tax professional or accountant familiar with New Mexico's state tax nuances to optimize deductions.

As of 2026

Insurance premium deductions remain a standard business expense on both federal and New Mexico state tax returns, provided the insurance is directly related to business activities. Changes in tax law or insurance requirements may affect deductibility, so ongoing compliance monitoring is recommended.