Discussion:Self-employed health insurance with W-2 employees
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Discussion Forum Index --> Tax Questions --> Self-employed health insurance with W-2 employees
| 5 September 2006 | |
| The client has a sole proprietor business with full time W-2 employees. She has a health insurance policy in her name only. She does not offer health insurance to her employees. Is she still able to deduct her health insurance premiums above the line? Is this discrimation in favor of the employer if she takes an above the line deduction? Please tell me where I can find a definitive answer to this question. | |
| September 5, 2006 | |
| You're actually allowed to discriminate on health insurance. Sec. 83 pops to mind, that might not be it, tho'. And yes, above the line on the 1040. Not directly on the Sch. C. | |
| 5 September 2006 | |
| I would second JR1's answer. The SE health insurance deduction is a deduction for the individual proprietor, not for the business. It is not like corporate fringe benefits, some of which cannot discriminate in favor of highly compensated employees. | |
Michaelstar (talk|edits) said: | 5 September 2006 |
| All in favor - I! Now if the sole proprietor has a SEP that would be a different story. | |
| 5 September 2006 | |
| A colleague of mine and I went around and around with this last year. The conclusion we came to was, no employees, no problem. Health insurance premiums on an individual policy in the name of the sole proprietor could be deducted as an adjustment to income on Form 1040. However, if there were employees, then in order to deduct the premiums on the front of the Form 1040, the proprietor had to have a group policy established under the name of the business and provide health insurance for his employees. Otherwise the premium could only be deducted on Schedule A subject to the 7.5% cap.
I will try to find where we got evidence to support this and post it later, though time is scarce with 10/16 approaching. Sure the proprietor can discriminate, he can have health insurance and not provide any for his employees. However, this is not what determines whether he/she can deduct his premiums as an adjustment to income. I still generally take the deduction on the front of the Form 1040 if there are employees, and there is no group policy. But I warn my clients that this is a grey area of the law, and that it could get challenged. | |
| 5 September 2006 | |
| Kendrick, there is nothing in Sec. 162(l) that says a "plan" must consist solely of policies issued in the name of the business. However, for what it's worth, the IRS has issued a press release saying that they feel that this is the way it ought to be. | |
| 5 September 2006 | |
| IRS Self Employed. | |
| 5 September 2006 | |
| Riley-could you please site the press release so I may get a copy of it. ThanksCyndycpa 16:29, 5 September 2006 (CDT) | |
| September 5, 2006 | |
| Kendrick, you're confusing what came from the IRS attorney office in re: to S corps only. | |
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