If you carry no insurance at all, this article is not for you — and that is its own conversation with somebody other than a tax writer.

Four renewal notices arrive in the same month, all of them paid from the same account, all of them obviously business costs to the person paying them.

They land in four different places on the return. One of them lands nowhere.

The short answer

The policy Where it goes
General liability, E&O, malpractice, contents Line 15
Health insurance for your employees Line 14
Your own health insurance Schedule 1, via Form 7206
Disability covering your lost earnings Nowhere
Money set aside instead of insuring Nowhere

What line 15 is for

"Deduct premiums paid for business insurance on line 15."

General liability. Professional liability, errors and omissions, malpractice. Business property and contents. Commercial auto, where you are not using the standard mileage rate. The policies a business carries because it is a business.

Straightforward, fully deductible, and — unlike the two deductions below it — on Schedule C, which means it reduces the net profit that self-employment tax is figured on. That is worth noticing, because the largest insurance premium most self-employed people pay does not.

The clause that removes one of them

Same paragraph, and this is the part nobody reads to the end:

"Do not deduct amounts credited to a reserve for self-insurance or premiums paid for a policy that pays for your lost earnings due to sickness or disability."

Two exclusions in one clause.

Self-insurance reserve. Setting money aside in case something happens is not a deduction. It is still your money. A deduction needs an amount that actually left for an insurer.

Your own disability cover. The policy that pays you a monthly income if you cannot work — excluded by name.

There is a logic to it, and knowing it makes the rule easier to accept: the benefits are the other side. A disability policy you paid for with after-tax money generally pays out tax-free. Deduct the premium and the benefit would be taxable instead. The code picks one, and for a personal policy it picks this one.

Why this one stings more than the health ruleHealth insurance is not lost — it moves to Schedule 1 and still reduces income tax. Disability does not move. There is no other line, no other schedule, and no itemised route. It is simply a personal expense you pay for out of taxed money.

Health is on the line's own label

Line 15 reads "Insurance (other than health)" on the form itself. Your own health premium was never going there. It is figured on Form 7206 and reported on Schedule 1, and the month-by-month eligibility rule decides how much of it survives.

Your employees' health cover is a different matter and a different line:

"Deduct on line 14 amounts paid for employee accident and health insurance."

Employee benefit programs are an ordinary business expense. The distinction that runs through all of this is not health versus not-health — it is whose cover it is.

Four policies, one year

Policy Premium Destination
General liability $1,400 Line 15
Professional liability / E&O $2,200 Line 15
Business property and contents $600 Line 15
Line 15 total $4,200 Reduces profit and SE tax
Own disability income policy $1,800 Nothing
Own health insurance $9,600 Schedule 1, conditions apply

Six thousand dollars of premiums in the bottom two rows, and only one of them reaches the return at all.

Two smaller rules worth having

Life insurance. Premiums on a policy covering your own life, where you are directly or indirectly a beneficiary, are not a business deduction. Where life cover forms part of a real plan — funding a buy-out, securing a loan — the structure matters and that is an adviser's question, not a line on Schedule C.

Prepaid premiums. A payment buying coverage that runs well past the end of the tax year is allocated across the periods it covers, not deducted in full in the year it was paid. Paying two years up front in December does not buy two years of deduction in December.

What to do with the renewal file

Sort it once, by whose risk the policy covers:

  1. The business's risk — liability, property, professional. Line 15.
  2. Your employees — line 14.
  3. Your own health — Schedule 1, via Form 7206.
  4. Your own income — nowhere. Budget for it out of taxed money and stop expecting the deduction.

The fourth category is the one that surprises people, and it is better to be surprised in September than in April.

Common questions

What goes on line 15?
Business insurance. The Schedule C instructions: "Deduct premiums paid for business insurance on line 15." General liability, professional liability or errors and omissions, malpractice, business property and contents — the policies the business carries because it is a business.
Can I deduct my disability insurance?
No, and it is excluded by name. The instructions say do not deduct "premiums paid for a policy that pays for your lost earnings due to sickness or disability." The logic is symmetry: benefits from a policy you paid for with after-tax money are generally not taxed when they arrive.
Is there anywhere else to put it?
No. This is what makes it different from health insurance, which merely sits on another schedule. A personal disability policy is a personal expense and there is no line for it.
Where does my own health insurance go?
Not on line 15 — the line's own label is "Insurance (other than health)." It is figured on Form 7206 and reported on Schedule 1, with its own set of conditions.
What about health insurance for my employees?
A different line. The instructions: "Deduct on line 14 amounts paid for employee accident and health insurance." Line 14 is employee benefit programs, and it is a business expense in the ordinary way.
I set money aside instead of buying a policy. Is that deductible?
No. The instructions exclude "amounts credited to a reserve for self-insurance." Money you set aside is still your money; a deduction needs an amount actually paid to an insurer.
What about life insurance?
Premiums on a policy covering your own life where you are directly or indirectly a beneficiary are not a business deduction. If a life policy is part of your planning, that is a question for your adviser rather than a line on Schedule C.
I paid a two-year premium up front. Can I deduct it all?
Generally not in one year. A premium buying coverage that extends well beyond the tax year is allocated to the periods it covers rather than deducted in the year the cheque cleared.
Does line 15 reduce my self-employment tax?
Yes — and this is the quiet advantage it has over the health premium. Line 15 sits on Schedule C, so it reduces the net profit that self-employment tax runs on. The health deduction on Schedule 1 does not.

This article is for educational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional about your situation.

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