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Can My Business Pay For My Health Insurance?



If you are self employed you have most likely wondered if your business can pay for your health insurance and if the business can write off the expense.


The answer as with most things related to taxes is - it depends on how the business is taxed.


Sole Proprietorships

If the business is taxed as a sole proprietorship the business itself does not write off the health insurance expense for the owner. The payment for health insurance can run through the business. But it is not deducted on Schedule C of Form 1040. Instead this amount is listed as an adjustment to income on Schedule 1 of your Form 1040. Health insurance for your family and including qualifying children can also be included in this amount. It's important to note that because the self employed health insurance deduction does not reduce the income from the business it does not reduce self employment tax.


Partnerships

Partners in partnerships may be eligible for the self employed health insurance deduction as well. If the partner themselves pays the health insurance they can make the adjustment on Schedule 1 of their Form 1040 just like a sole proprietorship. However, if the partnership pays for the health insurance it is considered a guaranteed payment to the partner and must be reported on the partner's K-1.


S-Corporations

S-Corporations may pay for the health insurance premiums of an employee shareholder. When an S-Corporation does this for a shareholder that owns more than 2% of the shares of the S-Corporation the amount of the health insurance premium is deductible by the S-Corporation. It is added to the employee shareholder's W2 in box 14. So the health insurance is taxable to the employee shareholder, but is not subject to FICA taxes.


C-Corporations

C-Corporations may deduct health insurance premiums for their employee shareholders and the premiums are not required to be added to the employee's W2.


Other Considerations

Businesses are still subject to other regulations for employee benefits that may prevent them from being able to take advantage of deducting health insurance premiums. Some of these additional regulations include discrimination rules for highly compensated employees and ERISA regulations.

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