Self Employed Health Insurance

[tonia2021]

I have a new client that is self employed. He works one main business that is full time - all year around. He works a second business for the summer months. His wife also is self-employed (part time) for part of the year.

This couple pays health insurance premiums. Can we choose which business where to deduct these premiums (as far as the SE health insurance deduction)?

The taxpayer's main business shows a loss for the year. The other two part time businesses show profits.

How do we know which business - should the premium be pro rated based on the hours/days worked?

Thanks

[erchess]

Business Name

The insurance has to be in the name of the business. If he is an SP that can be his name. TTB is not clear to me on which business we are dealing with if the self employed taxpayer has two businesses in his name. Maybe he isn't supposed to do that. It does seem however that we are dealing with only one business.

You might see if he can qualify to use one of the optional methods of calculating his SE Tax. If he qualifies and so elects then he can deduct his self employed health insurance even if he has a loss on the business.

[Burke]

I have a new client that is self employed. He works one main business that is full time - all year around. He works a second business for the summer months. His wife also is self-employed (part time) for part of the year. This couple pays health insurance premiums. Can we choose which business where to deduct these premiums (as far as the SE health insurance deduction)?The taxpayer's main business shows a loss for the year. The other two part time businesses show profits. How do we know which business - should the premium be pro rated based on the hours/days worked?

Thanks

If all businesses are sole proprietorships, aren't the profits and losses netted for SE tax? And netted on the 1040 for Sche C reporting? I don't see why you cannot use the net profit to determine SE health ins deduction. If there is no net profit, then no deduction.

[Bees Knees]

If all businesses are sole proprietorships, aren't the profits and losses netted for SE tax? And netted on the 1040 for Sche C reporting? I don't see why you cannot use the net profit to determine SE health ins deduction. If there is no net profit, then no deduction.

Seems logical. Except those aren't the rules. IRS has ruled a policy can only be in the name of one business.

As to which business it has to be in, it doesn't matter. Pick the one that has a profit, and there you go...that's the one to use.

[Burke]

Seems logical. Except those aren't the rules. IRS has ruled a policy can only be in the name of one business.
As to which business it has to be in, it doesn't matter. Pick the one that has a profit, and there you go...that's the one to use.

If you were talking about corps I would agree. However, in the case of SP's, the health ins can be in the TP's name.

[Bees Knees]

If you were talking about corps I would agree. However, in the case of SP's, the health ins can be in the TP's name.

I know. That still doesn't change the fact that IRS ruled it can only be tied one Schedule C business.

Letter ruling 200524001:

ISSUES

1.....

2. Whether a self-employed individual may aggregate the profits and losses of two
or more businesses to establish the net income ceiling up to which he or she
may claim insurance costs deductions under I.R.C. § 162(l).

CONCLUSIONS

1......

2. No. Under I.R.C. § 162(l), the health insurance costs deductions must be
claimed for a specific plan providing medical care coverage that is established
under a specific trade or business and the deductions are limited to the earned
income of that specific trade or business.

May not be logical, but those are the rules.

[veritas]

There is a worksheet in pub 535

for self employed with more than one business.

It's a little more complicated since you must reduce the profit by the self employment tax adjustment to compute the health insurance deduction..

[peggysioux]

Self-Employed Health Insurance

If taxpayer is over 2% shareholder in S-Corp and has $100,000 profit and has health insurance under the S-Corp that is added to his wages and hence flows to 1040, than eligible to self-employed HI deduction. As noted in previous posting, you do not combine additional businesses together. So that being said, if taxpayer has secondary business as sole proprietor with a loss of $95,000, would his $12,000 health insurance deduction be limited by netting the two businesses together? I don't see that The Tax Book gives a clear answer on this. It only refers to the situation that taxpayer has two businesses and you can't add the two businesses' net profits together to allow a bigger deduction.

[peggysioux]

S-Corp - Health Ins.

Got my answer by following the form in pub. 595.

Thanks!

Peg

[AccTaxMan]

Sorry to have to dig up an old thread.

What about the health insurance premium of a partner in a partnership? He receives a Form K-1 every year. He pays self-employment tax on the ordinary income shown on the Form K-1 because he actively works there full time.

I think he is considered self-employed...please correct me if I am wrong. So if that's the case, can he deduct the premium of a health insurance plan under his own name?

[veritas]

The premiums

Sorry to have to dig up an old thread.

What about the health insurance premium of a partner in a partnership? He receives a Form K-1 every year. He pays self-employment tax on the ordinary income shown on the Form K-1 because he actively works there full time.

I think he is considered self-employed...please correct me if I am wrong. So if that's the case, can he deduct the premium of a health insurance plan under his own name?

must be paid by the partnership and are a separate listed item on th K-1