STM Tax Deduction for Premiums?

Oct 31, 2016

  1. dgoldenz
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    dgoldenz Moderator Moderator

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    Anyone know what the law is in regards to deducting STM premiums for self-employed people? I can't seem to find any answer as to whether it's deductible or not on google search and with all of the potential STM cases this year it seems like it would be a good idea to know the answer...
     
    dgoldenz, Oct 31, 2016
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  2. HealthGuy
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    HealthGuy Guru

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    AGREED, this is a great question !
     
  3. rcduggan
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    rcduggan Super Genius

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    per IRS publication 535 business expenses (2015)

    Self-Employed Health Insurance Deduction
    You may be able to deduct the amount you paid
    for medical and dental insurance and qualified
    long*term 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 2015, 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 judgment,
    decree, or other order of any court of competent jurisdiction.

    i am not a cpa but based on the information provided, yes you can. you can bet your lucky stars i am deducting the STM policies i had in place ; )
     
  4. 65VETTEnotyet
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    65VETTEnotyet New Member

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    Wow great find, the fact that the use of the word "qualified" is a reference in the same sentence, isolated to LTC, is huge....Definitely somewhere to hang your hat. Thanks!
     
  5. junkman
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    junkman Guru

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    Note that you can't deduct premiums paid to an employer. I have dental through a very small C corp. It isn't worth the hoops of a 125 and I can't deduct the dental premiums.
     
    junkman, Nov 13, 2016
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  6. rcduggan
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    rcduggan Super Genius

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    well right. in a corporation, if you're an owner/officer and/or W2 that is also an officer you can't "deduct" premiums paid and instead you increase your salary by the cost of the insurance if i remember correctly.

    i think the OP was asking simply if he was a sole prop, bought STM, could he deduct those premiums. the answer is yes
     
    rcduggan, Nov 14, 2016
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  7. junkman
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    junkman Guru

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    Sorry, I didn't mean to confuse the situation. SM counts as medical premium and is deductible as any other medical premium.

    You always have to be careful to define whhat entity you're talking about. My reference above was specifically to the case of a "C" Corp. Premiums paid by the Corp are fully deductible to the Corp.

    The only way for premiums to be tax free for an employee is for them to be excluded from income through a 125 Plan (ie salary reduction). Premiums are then still deducted by the Corp.

    Think of the steps in a transaction. Revenue flows in and is taxed. There are 2 ways to not pay tax.

    1) have an offsetting expense ie deduction

    2) not receive the income ie salary reduction agreement in the case of a 125 Plan.

    Owners of anything entity except a C Corp cannot get the benefit of a 125 Plan. Employees except for the owner and dependents can benefit from a 125 Plan.
     
    junkman, Nov 15, 2016
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  8. AmirMarashi
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    AmirMarashi Expert

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    If you’re self-employed and not eligible for an employer-sponsored health plan through your spouse or domestic partner, you may be able to write off your health insurance premiums. You can’t write off more in health insurance premiums than you earned, though.

    When you’re self-employed, your health insurance premiums are considered an adjustment to your income; they are listed on the first page of Form 1040 instead of being listed with your other tax deductions on Schedule A. This appears to decrease your overall income. In some ways, this adjustment-to-income approach is better than a traditional deduction.
     
  9. junkman
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    junkman Guru

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    @Amir, it is not better than a straight Sch C deduction which would be the equivalent of running it through a 125 plan.

    Of course, if wishes were fishes, we'd have some to fry.
     
    junkman, Apr 24, 2017
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