2015 C corporation Health Insurance Deduction

[equinecpa]

I have a client who had a HRA under 105. For 2014 I believe it is safe to deduct due to Notice 2015-17.

For 2015: Client works full time for business and is only employee. Is there any way to deduct health insurance premiums for his own individual health insurance policy this year?

[DaveinTexas]

It appears so

I haven't seen any language in the ACA rules denying this deduction for the HRA or the deduction for the shareholder's health insurance premiums. The key is if the C Corp were to hire an employee that is not the spouse of the current shareholder. Then, in order to keep this plan alive you must have a "group plan" in place or you will suffer some harsh penalties. The penalties, from what I understand, are imposed if the C Corp were to reimburse the employee's health insurance costs outside of a group plan, and the C Corp treats this benefit as a pre-tax deduction. You would have to either create a group health plan or treat the reimbursement as fully taxable box 1, 3, 5 wages.

But, the way you described your client, it appears he is in the clear for 2014 and 2015. Just alert him to inform you of any new hires on the horizon because that is when he must make some changes to the arrangement.

[TaxGuyBill]

"and is only employee."

That points allows an HRA with no restrictions.

"or treat the reimbursement as fully taxable box 1, 3, 5 wages."

I agree with most of your post, but I disagree with this point. It can not be a "reimbursement" AT ALL (if there is more than one employee) or it would be subject to the penalty. They could increase the taxable wages (with no direct connection to health insurance costs) for the employee, but it can not be a "reimbursement" for health insurance costs.

[DaveinTexas]

That points allows an HRA with no restrictions.





I agree with most of your post, but I disagree with this point. It can not be a "reimbursement" AT ALL (if there is more than one employee) or it would be subject to the penalty. They could increase the taxable wages (with no direct connection to health insurance costs) for the employee, but it can not be a "reimbursement" for health insurance costs.

Sorry Bill, I should have clarified that point. That is exactly what I meant. It needs to be treated as additional gross wages and not a true connection to the reimbursement of a health insurance policy cost. Nice clarification sir.