The Schedule C for the taxpayer is a consultant and has no employees. For health insurance I just take the deduction above the line for premiums paid for both the taxpayer and his wife. They both also have long term care premiums. To the extent deductible can I add the taxpayer's and the wife's premiums together for an additional above the line deduction???
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§162(l)(2)(C) apparently says yes as long as you stick to the age based limitations.Originally posted by JON View Post
(C) Long-term care premiums. In the case of a qualified long-term care insurance contract (as defined in section 7702B(b) ), only eligible long-term care premiums (as defined in section 213(d)(10) ) shall be taken into account under paragraph (1) . -
Wife MAY be excluded from adjustments
I assume that there is a separate LTC policy for the husband and a separate LTC policy for the wife.
If that is the case, how do you justify the wife's expenses as an adjustment to income for the husband's Schedule C?
Agreed the wording is somewhat unclear, but I would put it into the same category as a Sch C (husband) including his Medicare premiums, but not able to use his wife's Medicare premiums except for any Schedule A issues.
As for "regular" insurance, you can always do an end run by having a "family" policy and then, apparently, the Sch C person can claim the full policy premiums subject to the usual limitations. My opinion is that any insurance policies that do not cover the husband (e g the wife has her own) would be excluded.
And then you can also encounter the infamous insurance plan "being established in the name of the business" issues.
FWIW: There have been many, many prior posts on this topic so you may wish to look around.
FEComment
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NYEA always points in the right direction
Thanks to NYEA
From IRS http://www.irs.gov/publications/p535/ch06.html
SandySelf-Employed Health Insurance Deduction
You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following.
A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., box 14, code A.
A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.
The insurance plan must be established under your business.
For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
Partners and more-than-2% shareholders may be able to amend prior year returns to take any self-employed health insurance deductions allowed under the rules explained above. Shareholders should write "Filed Pursuant to Notice 2008-1" at the top of any amended return.
Take the deduction on Form 1040, line 29.
Qualified long-term care insurance. You can include premiums paid on a qualified long-term care insurance contract for you, your spouse, or your dependents when figuring your deduction. But, for each person covered, you can include only the smaller of the following amounts.
The amount paid for that person.
The amount shown below. Use the person's age at the end of the year.
Age 40 or younger–$310
Age 41 to 50–$580
Age 51 to 60–$1,150
Age 61 to 70–$3,080
Age 71 or older–$3,850
Qualified long-term care insurance contract. A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. The contract must meet all the following requirements.
It must be guaranteed renewable.
It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits.
It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed.
It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses.Comment
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Huh?
S T - What exactly is your point, other than the cut/paste stuff?
Are you then indirectly stating that a sole proprietor can deduct medical premiums/LTC premiums for policies that do NOT include the sole proprietor/business???
For my 2¢ worth, I seriously doubt if that is the case, unless the wife/children are included in the policy versus having a separate policy(-ies) of their own.
I still think this is the major issue:
The insurance plan must be established under your business.
For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
Time to move on for tonight....
FEComment
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Maybe this Reference Will Assist
TB page 5-10 for sole proprietors
Then you can reference ltr rul 200524001Insurance in the name of the individual. To qualify
for the self-employed health insurance deduction,
the insurance must be established by a business
[IRC §162(l)(2)(A)]. A sole proprietor can meet
this requirement by purchasing the health
insurance coverage under his or her personal
name. (Ltr. Rul. 200524001)
Then for spouse as an employee see TB pg 5-11 and Rev Rul 71-588
SandyEmployee-spouse health insurance. There is an exception to the
rule that prevents a self-employed individual from deducting his
or her own health insurance premiums on Schedule C as a business
deduction. The exception applies when the self-employed
individual hires his or her spouse as an employee of the business.
The self-employed individual then provides family accident
and health coverage for the employee-spouse, either through a
self-insured medical expense reimbursement plan under Section
105(b), or by purchasing an accident and health insurance policy
under Section 106(a). The self-employed individual is then covered
by the plan as a member of the employee-spouse’s family.
By utilizing this arrangement, the self-employed individual takes
a deduction on Schedule C for 100% of the cost of providing
health coverage to his or her employee-spouse and family, which
includes himself or herself as the spouse of the employee-spouse.
Deductible expenses include reimbursed medical expenses for
health insurance premiums and other costs not reimbursed by
insurance. The employee-spouse is allowed to exclude from gross
income the cost of the health coverage and medical expense
reimbursements. (Rev. Rul. 71-588)
The employee-spouse must be a bona fide employee of the selfemployed
individual. The question of whether an employeespouse
is a bona fide employee is determined on a case-by-case basisComment
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Clarification
From the original post:
"The Schedule C for the taxpayer is a consultant and has no employees. For health insurance I just take the deduction above the line for premiums paid for both the taxpayer and his wife."
FEComment
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Wife
Yes wife is the issue, Could be (and I see what I think is your point) that if the wife maintains a "separate long term care policy" and the husband has a "separate long term policy" which is most often the case, then the wife's LTC premium "might not be deductible? I have not run into a Group LTC policy for "small business":- so really don't know!
however on SE insurance deduction above the line, doesn't it state that it is for the Sched C owner and his spouse and family and individual named?
AmbiguousSelf-Employed Health
Insurance Deduction
You may be able to deduct premiums paid for
medical and dental insurance and qualified
long-term care insurance for you, your spouse,
and your dependents if you are one of the follow-
ing.
• A self-employed individual with a net profit
reported on Schedule C (Form 1040),
Profit or Loss From Business, Schedule
C-EZ (Form 1040), Net Profit From Busi-
ness, or Schedule F (Form 1040), Profit or
Loss From Farming.
• A partner with net earnings from
self-employment reported on Schedule
K-1 (Form 1065), Partner’s Share of In-
come, Deductions, Credits, etc., box 14,
code A.
• A shareholder owning more than 2% of
the outstanding stock of an S corporation
with wages from the corporation reported deducon
Form W-2, Wage and Tax Statement.
The insurance plan must be established
under your business. figur•
For self-employed individuals filing a
Schedule C, C-EZ, or F, the policy can be
either in the name of the business or in the
name of the individual.
•
SandyComment
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My understanding
If the regular health insurance is in the sole proprietor's name and includes his spouse this is an adjustment to income. The Sole proprietor's LTMC is also an adjustment. The spouse's LTMC if under her name is not an adjustment to income.Comment
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Confusing, but
I think Sandy has enough source information that I would be willing to present it to an auditor. Thank you for all the comments..Comment
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Nashville, this is the link...
This is the link where I read about (self employed) long term care insurance deductibility.
Did I misunderstand when I thought my corp could pay the premiums, include them in my W2, as it does my cobra premiums?
Originally posted by S T View Post"I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur GodfreyComment
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Cobra is not Established
There is the eternal qualification that the insurance must be established in the name of the business, and clearly, Cobra does NOT.
However, this qualifier for the deduction for self-employed insurance has come under attack and I understand in recent years the IRS is reluctantly backing off, although not officially. For example, how can a professional consultant (as many of us are) with no employees even OBTAIN insurance in the "name of the business" as well as refusal by insurance companies to alter individual policy designations.
Simply put, right or wrong (and until I am clearly shown otherwise), I have deducted COBRA for myself.
Doesn't address Long-term Health Insurance, but COBRA has been raised also as a factor in this thread.Comment
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Not if Schedule C - Sole Proprietor
As I understand it, if Schedule C - sole prop you do not have to establish under the name of the business, and then LTC, Cobra, etc should also qualify.
Based on the above info from IRS - it seems there is a lot of "leeway" in "name of business" or "name of individual"Self-Employed Health Insurance Deduction
You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following.
A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., box 14, code A.
A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.
The insurance plan must be established under your business.
For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
I do believe that once you opt for "Cobra" it is an individual plan and if you are one of the aforemetnioned "qualifying" in the IRS post you should be able to deduct as SE Insurance above the line. LTC is also part of the "qualifying"
SandyComment
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thanks
You are so right about being a sole owner of a company and having a "company" established policy. It just ain't happening...
I called the IRS about the COBRA insurance and was told live-in-person that I was within the laws doing it this way. (Have the corp pay the insurance and include it in my W2)
I called because I needed to be absolutely sure I was doing it right, to get the deduction.
What I didn't know was that LTCare Insurance is also a qualifier for the same rules. That was how I read the law in the previous post."I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur GodfreyComment
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