Umbrella Liability Policy a business expense??

Is she paid on a W-2 as an employee, or on a 1099-MISC as a contractor? If a W-2, is the checkbox for statutory employee checked.

If a contractor or statutory employee then deduct the expense in full on Schedule C. If an employee, deduct on Schedule A; but the deduction is subject to the 2% limit (meaning you can only deduct amounts over 2% of your AGI, which makes the deduction useless for most people), and also the deduction is not allowed under AMT. Don't forget to also deduct your business miles and keep a log of miles traveled.

Hello,

I'm going to assume that she is like most real estate agents - self-employed and files a Schedule C with her return.

She has a couple of options here. Either she can deduct 56.5 cents for every work-related mile driven, and that deduction rolls all the gasoline, maintenance and insurance costs together into one, so if she already deducts her car-related expenses this way, she can't deduct the insurance premiums.

If she deducts her actual expenses for the use of her car to work (instead of taking the 56.5/mile deduction), then she can deduct 100% of the premiums on this policy, assuming that she wouldn't have it if she wasn't a real estate agent. I say this because this is a separate insurance policy from the regular car insurance. Deducting the regular car insurance premiums would be permitted too, but restricted to the percentage of time the car is used for work (i.e. she uses the car 80% of the time for work, she can deduct 80% of the premiums).