While it is easy for companies to write off health insurance for their employees as a business expense, it can seem a little more complicated for those who are self-employed or who are connected to a business in varying shades of gray. As health insurance can be a significant financial commitment, it is always worth investigating your options to see how you might be able to claim this amount as a business expense.
As navigating the world of taxes and financial dealings can feel pretty complicated, we’ve tried to reduce the confusion around the topic by narrowing down the rules according to each professional status. However, as each individual situation varies and with it the way that you should approach this process, sometimes it is still best to seek the advice of a professional insurance provider to clarify your position.
Individuals who choose to buy their own health insurance can claim these expenses just as much as companies can claim group health insurance as a business expense. However, individual insurance claims don’t fall into the same category. By claiming health insurance as a personal tax deduction, individuals can enjoy the same remuneration on their insurance plan as large-scale businesses do with their group plans – even without being covered under a company plan. Although some of these situations mean that that claim is classified as a personal claim, the remuneration still functions in the same way as if you were claiming a business expense.
The system makes provisions for a variety of employment situations, with many different possible ways to claim the amount paid for your insurance plan as an expense:
Being able to deduct premiums for medical, dental and long-term health insurance as a self-employed individual is dependent upon proving that the business is currently profitable, as demonstrated by the Schedule (C), Profit and Loss From Business. Self-employed individuals filing a Schedule C, C-EZ or F can cite a policy that is either in the name of the business or the name of an individual. The deduction itself is then included as a part of the individual tax return.
Those in a partnership are also able to claim their health insurance as an expense, which always materializes as a personal deduction (as partners do not pay business income taxes). Premiums are reported to a partner as gross income on a form, and a partner deducts these in the same way as a sole proprietor.
S Corporation Shareholders
Health insurance deductions are handled in a similar way for S Corporations as they do for partnerships, as neither of them pays business income taxes. Either the shareholder or the corporation can pay the health insurance premiums, and if the corporation pays, they are stated as income on a wage statement and deductions are declared while completing a personal income tax form. The policy must be in the S Corporation’s name.
Sometimes, for one reason or another, companies are unable to or choose not to provide health care cover for its employees. Individuals who are employed by one of these businesses can create a health savings account, which allows contributions to reduce their personal income tax. Earnings and distributions used for medical expenses in this account are both exempt from tax.
Although these various employment situations might seem to complicate the process of claiming health insurance expenses, rest assured that you are ultimately very likely to be able to claim this amount – even if the precise terminology doesn’t class your claim as a “business expense.” Whether you’re looking for an individual plan or on behalf of a company, BuyHealthInsurance.com has a range of coverage options to suit every need and budget. Get your free quote today for your health insurance solution.