Health Ins - Self Employed

[Crank]

Are health insurance premiums deductible on a Schedule C (Sole Prop) when the policy is not in the name of the business but in the name of the individual?

[Margaret CPA in OH]

Page 1, Line 29

[schirallicpa]

If Sch C has loss, your input on Page 1, line 29 transfers to Sch A.

[Jack from Ohio]

Insurance premiums never go on Sch. C.

[Crank]

Oops spoke without thinking again, not Sch C but line 29

This excerpt from pub 502, p21 seems to indicate they arent deductible for sole props when the policy is not in the name of the business.

If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and your children who were under age 27 at the end of 2013. For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business.

[Jack from Ohio]

This excerpt from pub 502, p21 seems to indicate they arent deductible on Sch C for sole props when the policy is not in the name of the business.

If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and your children who were under age 27 at the end of 2013. For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business.

Go for it then.

I read this....

For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder.

What partnership, or corp is the client a shareholder in??

Pays to read carefully.....

[jasdlm]

If he is a schedule C, by definition, isn't his business name his name (and any other name is a dba)?

[Jack from Ohio]

If he is a schedule C, by definition, isn't his business name his name (and any other name is a dba)?

[jasdlm]

Did I say something incredibly stupid, and I'm too tired to realize it?

[Crank]

Go for it then.

I read this....

For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder.

What partnership, or corp is the client a shareholder in??

Pays to read carefully.....

Yes, it does pay to read carefully That is why I asked. I have a client who insists it is deductible for his sole prop and the insurance is in his name. His argument is that since he is a sole prop his name IS the business name. But he is not an S corp. so I only ever included it on his Sch A.

I just wanted to know what others think about this because I may have to let him go as he is adamant that it can be deducted on the 1040 line 29 and I believe it is a sch A deduction.

[jasdlm]

Don’t Miss the Health Insurance Deduction if You’re Self-Employed

IRS Tax Tip 2013-43, March 28, 2013

If you are self-employed, the IRS wants you to know about a tax deduction generally available to people who are self-employed.

The deduction is for medical, dental or long-term care insurance premiums that self-employed people often pay for themselves, their spouse and their dependents. The insurance can also cover your child who was under age 27 at the end of 2012, even if the child was not your dependent.

You may be able to take this deduction if one of the following applies to you:

• You had a net profit from self-employment. You would report this on a Schedule C, Profit or Loss From Business, Schedule C-EZ, Net Profit From Business, or Schedule F, Profit or Loss From Farming.

• You had self-employment earnings as a partner reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc.

• You used an optional method to figure your net earnings from self-employment on Schedule SE, Self-Employment Tax.

• You were paid wages reported on Form W-2, Wage and Tax Statement, as a shareholder who owns more than two percent of the outstanding stock of an S corporation.

There are also some rules that apply to how the insurance plan is established. Follow these guidelines to make sure the plan qualifies:

• If you’re self-employed and file Schedule C, C-EZ, or F, the policy can be in your name or in your business’ name.

• If you’re a partner, the policy can be in your name or the partnership’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the partnership must reimburse you and include the premiums as income on your Schedule K-1.

• If you’re an S corporation shareholder, the policy can be in your name or the S corporation’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the S corporation must reimburse you and include the premiums as wage income on your Form W-2.

For more information, see Publication 535, Business Expenses. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Small Business and Self-Employed Tax Center
• Publication 535, Business Expenses
• Publication 225, Farmer’s Tax Guide
• Schedule C, Profit or Loss From Business
• Schedule C-EZ, Net Profit From Business
• Schedule F, Profit or Loss From Farming

Subscribe to IRS Tax Tips

Page Last Reviewed or Updated: 25-Nov-2013

[jasdlm]

Pub 535 - Page 18 - . . . Am I totally misreading the question?

Self­Employed Health

Insurance Deduction

You may be able to deduct premiums paid for

medical and dental insurance and qualified

long­term care insurance for yourself, your

spouse, and your dependents. The insurance

can also cover your child who was under age

27 at the end of 2013, even if the child was not

your dependent. A child includes your son,

daughter, stepchild, adopted child, or foster

child. A foster child is any child placed with you

by an authorized placement agency or by judg­

ment, decree, or other order of any court of

competent jurisdiction.

One of the following statements must be

true.

You were self­employed and had a net

profit for the year reported on Schedule C

(Form 1040), Profit or Loss From Busi­

ness; Schedule C­EZ (Form 1040), Net

Profit From Business; or Schedule F (Form

1040), Profit or Loss From Farming.

You were a partner with net earnings from

self­employment for the year reported on

Schedule K­1 (Form 1065), Partner's

Page 18 of 50 Fileid: … tions/P535/2013/A/XML/Cycle07/source 12:15 ­ 13­Mar­2014

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Page 18 Chapter 6 InsuranceShare of Income, Deductions, Credits,

etc., box 14, code A.

You used one of the optional methods to

figure your net earnings from self­employ­

ment on Schedule SE.

You received wages in 2013 from an S cor­

poration in which you were a

more­than­2% shareholder. Health insur­

ance premiums paid or reimbursed by the

S corporation are shown as wages on

Form W­2, Wage and Tax Statement.

The insurance plan must be established, or

considered to be established as discussed in

the following bullets, under your business.

For self­employed individuals filing a

Schedule C, C­EZ, or F, a policy can be ei­

ther in the name of the business or in the

name of the individual.

For partners, a policy can be either in the

name of the partnership or in the name of

the partner. You can either pay the premi­

ums yourself or your partnership can pay

them and report the premium amounts on

Schedule K­1 (Form 1065) as guaranteed

payments to be included in your gross in­

come. However, if the policy is in your

name and you pay the premiums yourself,

the partnership must reimburse you and

report the premium amounts on Sched­

ule K­1 (Form 1065) as guaranteed pay­

ments to be included in your gross income.

Otherwise, the insurance plan will not be

considered to be established under your

business.

For more­than­2% shareholders, a policy

can be either in the name of the S corpora­

tion or in the name of the shareholder. You

can either pay the premiums yourself or

your S corporation can pay them and re­

port the premium amounts on Form W­2 as

wages to be included in your gross in­

come. However, if the policy is in your

name and you pay the premiums yourself,

the S corporation must reimburse you and

report the premium amounts on Form W­2

as wages to be included in your gross in­

come. Otherwise, the insurance plan will

not be considered to be established under

your business.

Medicare premiums you voluntarily pay to

obtain insurance in your name that is similar to

qualifying private health insurance can be used

to figure the deduction. If you previously filed re­

turns without using Medicare premiums to fig­

ure the deduction, you can file timely amended

returns to refigure the deduction. For more in­

formation, see Form 1040X, Amended U.S. In­

dividual Income Tax Return.

Amounts paid for health insurance coverage

from retirement plan distributions that were non­

taxable because you are a retired public safety

officer cannot be used to figure the deduction.

Take the deduction on Form 1040, line 29

[Jack from Ohio]

Page 1, Line 29

Form 1040, not Sch. C.

If Sch C has loss, your input on Page 1, line 29 transfers to Sch A.

[Crank]

Thanks jasdlm!

It appears that contrary to Pub 502, it is deductible for a sole prop without being in the business name. I guess I have some amendments to do ...<sigh>.

[joanmcq]

Name of individual is considered name of biz for Sch C.

[kcjenkins]

Yes, it does pay to read carefully That is why I asked. I have a client who insists it is deductible for his sole prop and the insurance is in his name. His argument is that since he is a sole prop his name IS the business name. But he is not an S corp. so I only ever included it on his Sch A.

I just wanted to know what others think about this because I may have to let him go as he is adamant that it can be deducted on the 1040 line 29 and I believe it is a sch A deduction.

I think he is right on this one. As a Sch C business, his name is the business name, as in Joe Doe, dba Joe's Repair shop. Look at the top line of the Sch C, what's there is all that has to be on the insurance.

[Jack from Ohio]

Ok, where do you deduct health insurance on Schedule C? I am truly missing something here...

Page 1 of the 1040 for self-employed health insurance. I am not agreeing at all with putting it on Sched. C.

[joanmcq]

NOT on Sch C!!

Line 29 of the 1040. But jsdm was saying he or she did not deduct on line 29 because it wasn't in the 'name of the biz'.

[Jack from Ohio]

Are health insurance premiums deductible on a Schedule C (Sole Prop) when the policy is not in the name of the business but in the name of the individual?

Pardon me for being confused.....

[kcjenkins]

Oops spoke without thinking again, not Sch C but line 29

See his second post, Jack, where he corrects the one you quoted.

[mcb39]

I have been deducting it on Line 29 for at least a thousand years. We are both self-employed. I am Sch C; he is 1065 K1.

[GeneInAlabama]

>I have been deducting it on Line 29 for at least a thousand years.<

WOW! I didn't realize you were that old.

[mcb39]

>I have been deducting it on Line 29 for at least a thousand years.<

WOW! I didn't realize you were that old.

Well, I just might be!

[RitaB]

Remember that year, 2010?, when we also deducted health insurance on Sch SE? I hate it when something is for one year. Or a couple of years, like adding real estate tax to the standard deduction. I still have people thinking they are deducting real estate tax somewhere.