Checkmark iconCan I Write This Off?

Can I write off cyber liability insurance?

TL;DR

Yes, cyber liability insurance can generally be written off as a business expense if it is ordinary and necessary for your business.

Detailed Answer

Cyber liability insurance is deductible as a business expense if it is considered both ordinary and necessary for your trade or business. An ordinary expense is one that is common and accepted in your industry, while a necessary expense is one that is helpful and appropriate for your business. For example, a tech company handling sensitive customer data would likely find cyber liability insurance both ordinary and necessary. However, if the insurance is for personal use or not directly related to business operations, it would not be deductible.

Where to Put It on the Tax Form

Schedule C (Form 1040), Line 15 for sole proprietors, or on the appropriate line for business expenses on corporate tax returns.

Real World Example

A small IT consulting firm purchases cyber liability insurance to protect against data breaches. The firm includes the cost of this insurance as a business expense on their Schedule C, reducing their taxable income.

Audit Risk & Documentation Tips

Maintain documentation such as the insurance policy, invoices, and proof of payment. Ensure the expense is clearly related to business activities to substantiate its necessity. Keep records for at least three years in case of an audit.

IRS Reference

IRS Publication 535, Business Expenses

Relevant Industries

TechnologyE-commerceFinancial ServicesHealthcareSmall Business

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 7, 2025

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