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Or the ones who set up their businesses overseas claiming they don't owe any U.S. taxes.
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arnguy or anyone else who knows-
I had this question come up today. I have a 5 person group plan at the top rate table. The owner is healthy and wants to drop off the plan and get individual coverage and leave the other 4 on the group plan.
The business is a C-Corp, can he pay the premiums individually in his name and deduct it on his 1040? Is it not deductible? I would appreciate any help I can get.
I had this question come up today. I have a 5 person group plan at the top rate table. The owner is healthy and wants to drop off the plan and get individual coverage and leave the other 4 on the group plan.
The business is a C-Corp, can he pay the premiums individually in his name and deduct it on his 1040? Is it not deductible? I would appreciate any help I can get.
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Delta76, sorry I could not get back to you before now. The change in servers "locked me out" for almost two days. The answer is both yes and no. let me start with the no. Only self-employed individuals may deduct 100% of their health insurance premiums to the extent that the net profit exceeds the premiums paid. Self-employed (includes general partners in a partnership, limited partners receiving guaranteed payments, and taxpayers who receive wages from a S-Corporation in which they own more than 2% of the common stock) and have a net profit for the tax year are entitled to the deduction from the AGI.
The yes part is that any taxpayer who has unreimbursed medical expenses that exceeds 7.5% of the AGI, may deduct that portion of such qualified expenses that exceeds 7.5% of the AGI on Schedule A of Form 1040 as part of their Itemized Deductions.
Since the company is a C-Corporation, the owner is considered a wage earner and is not deemed a self-employed person. Therefore, he can deduct the individual health premiums he pays if when added to his other unreimbursed medical expenses the total exceeds 7.5% of his AGI on Schedule A (only extent that those expenses [including the health premiums]exceeds the 7.5% of the AGI)along with his other Itemized Deductions. He cannot deduct the health insurance premiums on Page 1 of Form 1040 which is a direct deduction against his AGI because he does not meet the definition of a self-employed person.
The yes part is that any taxpayer who has unreimbursed medical expenses that exceeds 7.5% of the AGI, may deduct that portion of such qualified expenses that exceeds 7.5% of the AGI on Schedule A of Form 1040 as part of their Itemized Deductions.
Since the company is a C-Corporation, the owner is considered a wage earner and is not deemed a self-employed person. Therefore, he can deduct the individual health premiums he pays if when added to his other unreimbursed medical expenses the total exceeds 7.5% of his AGI on Schedule A (only extent that those expenses [including the health premiums]exceeds the 7.5% of the AGI)along with his other Itemized Deductions. He cannot deduct the health insurance premiums on Page 1 of Form 1040 which is a direct deduction against his AGI because he does not meet the definition of a self-employed person.
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Thanks for the reply. Basically, if the 7.5% of AGI doesn't come into play, it can be deducted from AGI on the owners 1040 unless it is a C-Corp. I wish I would have known that two weeks ago, now I look like an ***.
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Hey, Delta76, don't feel like an ***. Taxation is an extremely complicated subject. That is why it is a cash cow for CPAs, tax attorneys, and other tax advisors. It also the reason that in the U.S. judicial system there is a separate Tax Court to ajudicate tax issues.
With regard to your statement, "Basically, if the 7.5% of AGI doesn't come into play, it can be deducted from AGI on the owners 1040 unless it is a C-Corp," be careful with that wording. The deduction from AGI on Page 1 of Form 1040 applies only to self-employed owners as defined in that list shown on my previous post. The definition of self-employed is the controlling issue for eligibilty. A C Corporation owner is merely an employee of the corporation which is an entity unto itself and, thus, is a taxpayer. Personally, I can't see any benefit to the owner of a C Corporation not staying on the group plan. The helath insurance premiums paid by the employer (in this case the C corporation) are deductible as an ordinary business expense by the corpoartion thereby reducing its taxable income.
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Arnguy, what is a helath insurance premium? This is getting very confusing.
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Just put that in there to see if you guys are alert and reading my post!
Seriously, it's that damn dyslexia. I tried to edit the post but the "Save" entry kept spinning for more than two minutes (attention Valdet). So here is the correction: health insurance.
Seriously, it's that damn dyslexia. I tried to edit the post but the "Save" entry kept spinning for more than two minutes (attention Valdet). So here is the correction: health insurance.
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Personally, I can't see any benefit to the owner of a C Corporation not staying on the group plan. The helath insurance premiums paid by the employer (in this case the C corporation) are deductible as an ordinary business expense by the corpoartion thereby reducing its taxable income.
That may be true from a pure tax standpoint, but there are other reasons. I have a five person group in which they are sitting at the top rate table, held hostage by one employee with expensive arthritis meds. The owner and his family are healthy, they can move to a fully funded HSA plan and still save $5,000. What we'll probably due is set up a Sect. 125 plan (since he is treated as an employee as a C-Corp), bump up his salary to adjust for the premiums paid from the personal check book, and and it will still be tax free to him.
That may be true from a pure tax standpoint, but there are other reasons. I have a five person group in which they are sitting at the top rate table, held hostage by one employee with expensive arthritis meds. The owner and his family are healthy, they can move to a fully funded HSA plan and still save $5,000. What we'll probably due is set up a Sect. 125 plan (since he is treated as an employee as a C-Corp), bump up his salary to adjust for the premiums paid from the personal check book, and and it will still be tax free to him.
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Sounds good, Delta76. There are always exceptions.
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