Discussion:Can a corporation deduct as medical expense the reimbursement of employees individual medical insurance premiums?
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Discussion Forum Index --> Tax Questions --> Can a corporation deduct as medical expense the reimbursement of employees individual medical insurance premiums?
| 24 January 2007 | |
| My client's employees all have their own individual health insurance plans (not thrue the company). Can the company reimburse the employees for their individual premiums and take a tax deduction?
Thanks | |
| 24 January 2007 | |
| Of course, as long as it doesn't result in excessive compensation issues, or in the unlikely event a salary needs to be capitalized. (Were you meaning to ask about the treatment of the employees if the employer does this?) | |
| January 24, 2007 | |
| Yes, but I'd call it an employee benefit program rather than medical expense. | |
| 20 May 2009 | |
| Just want to thank you guys again. Your comments are great source of information. | |
| 20 May 2009 | |
| Of course, the employee could only count the net unreimbursed amount toward Schedule A medical deductions. | |
Mikex2e7n5 (talk|edits) said: | 17 June 2009 |
| Did you look at revenue ruling 61-146 ? | |
| 17 June 2009 | |
| I would suggest they set up a HRA. It documents what the reimbursement is & how it is handled. Without the plan I would not recommend just reimbursing the employees as it could be considered income. | |
| 18 June 2009 | |
| I'd suggest that the client make the check payable to the health ins co instead of the employee. | |
| 19 June 2009 | |
| Take a look at establishing a MERP - Medical Expense Reimbursement Plan. That should solidify the deduction but also brings some nondiscrimination rules to play. Search the articles on this site with "Medical Expense Reimbursement Plan." | |
| 19 June 2009 | |
| Would someone please confirm (or refute) this. An HRA is not necessary to do this. A simple document stating the provisions of the plan and proof of insurance and premiums is all that is needed to allow a deduction (employee benefit, yes) to the employer and no income to the employee. The employee can be reimbursed directly and a check does not have to go directly to the insurance company. I know there are certain limitations and restrictions on this (e.g. S corp shareholders), which can be addressed in the plan document. Right? Wrong? Thank you. | |
| 19 June 2009 | |
| We set up an HRA for our office & my research lead me to believe that you probably did not need formal documents, but much like a 105 plan the better the paper work the more likely it would stand up on review. It was pretty inexpensive to set up, less than $200, and we administer it ourselves so there is no ongoing expense. In my mind it was the way to go and the employes have a formal document listing what it covers or not & how we fund it. The HRA can be set up to reimburse out of pocket medical, insurance premiums or both. Whe nwe were looking last year the only way to reimburse insurances premiums was through a HRA, but the first of this year they came out with a scetion 125 plan for premiums only so that would be another option. Either way you reimburse the employee. There are restrictions on owners in some entities like normal. | |
| 19 June 2009 | |
| LJACPA, You are correct.
This thread is specifically dealing with medical insurance premiums paid to a 3rd party insurer. Therefore, your focus needs to be on IRC §106, not §105. IRC §106 is fairly relaxed. No discrimination requirements, and reimbursement can be made to employee provided they have proof of insurance. No §125 or §105 HRA plans required. | |
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