Health Insurance Deductions


D

DolphinVJ

I am confused as to the tax treatment of Health Insurance
Premiums that Businesses would pay on behalf of their
owners. How to treat such premiums for each of these
business types -

Sole Proprietor, Partnership, S Corporation, LLC and C
Corporation? Are they deductible or not?

Thanks in advance for you input.
 
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E

ed

Sole Prop: Deduct on line 29 of 1040
Part: Distribute earnings. Deduct on line 29 of 1040
S Corp: Charge to W-2 wages without SS deductions. Deduct
on line 29 of 1040
C Corp: Deduct as expense. Employee gets no further
deduction.

Final net tax outcome exactly the same for all of these, if
they qualify.

ed
 
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D

DolphinVJ

Thanks Ed.

Let's take this one step further - can the said health
insurance premiums be expensed on the Income Statement (on
the books) of each of the types of Businesses, ie. sole
proprietor, partnership, LLC, S-Corp and C-Corp?
 
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E

ed

For a sole propriator it is not an expense. The SP pays the
premium and takes the deduction on line 29. It does not
show up on Schedule C and therefor does not reduce Schedule
C profit nor net of Schedule C going to Schedule SE.

For a Partnership, it is not an expense. Its total profits
are distributed to the partners on a K-1 with no mention of
the premiums, and partner deducts it on his line 29. If the
partnership paid the premium, it shows it as a draw by the
partner on the books, not an expense, and partner takes the
deduction on lne 29.

For An S-corp it is shown as wages paid and put it on the
shareholders' W-2. As such it is a deduction for the S-corp
and taxable income for the shareholder, who takes the
deduction on line 29.

For a C-corp it is a direct expense for the corporation and
a free perk for the stockholder-employee.

ed
 
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