In this two‑minute tax and legal tip, CPA‑attorney Mark J. Kohler explains how self‑employed individuals can deduct health‑insurance premiums. For sole proprietors, the process is straightforward: pay the premiums personally or through the business, report the total on the front page of Form 1040 as a self‑employed health‑insurance deduction, and provide the amount to the accountant. For owners of S‑corporations, the rules are stricter. The S‑corp must either pay the premiums directly or reimburse the employee‑owner, and the amount must be reported on the employee’s W‑2 box for health‑insurance benefits; only then can the deduction be claimed on the 1040. Kohler stresses that failing to follow these steps results in a disallowed deduction and potential audit risk, urging viewers to work with a knowledgeable CPA or tax preparer who asks about health‑insurance premium handling. He concludes with a brief self‑promotion of his free ebook and other resources for small‑business owners.
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Hi, Mark Kohler here with another two minute tax and legal tip. Let's talk about deducting your health insurance premiums. Now for millions of Americans that have a day job where their health insurance is paid for them, they don't need to worry about this. But there's a lot of us out there that pay for our own health insurance and we've got to figure out the best way to write it off and not screw it up on our tax return where we have a potential for an audit. Number one, let's assume you don't have an S Corporation or LL llc. You're just a sole proprietorship. That's probably the easiest way to write off your health insurance because you really can't mess up the process. Pay for it personally, pay for it out of your sole proprietorship, it's fine. It's 100% deductible and no matter how you pay for it, you just want to provide your accountant with the total premiums paid during the year and it'll be a self employed health insurance deduction. 100% on the front page of your 1040 now. Easy schmeasy. Now the trickiest situation is if you're an S corporation because I want you to get that self employed health insurance deduction and you've got to follow specific protocol. First and foremost, the easiest method to make sure you're in safe harbor provisions and you're okay is let the S corporation pay the premium directly for your health insurance. That's the best. Now if you pay for it personally, you may not be entitled to that health insurance deduction. So you have to let the S corporation reimburse you. Remember, you're an employee of the S Corporation. Therefore the S Corporation's got to pay for your benefit. You've got to follow that protocol even if you're the 100% owner of the S Corporation. Now the final step is to make sure that the health insurance premium is indicated and listed specifically on your W2 form. You may say, mark, I'm a small business owner. I've got an S corporation. It's really that important? Yes. If you don't follow this technical rule, you are disallowed. That help insurance premium deduction, it's got to be paid for by the S Corp, reimbursed by the S Corp and then indicated on the W2 that how much was paid by the S Corporation on your behalf as an employee, then you're allowed the deduction. Your accountant can work the magic. It's going to pop back in on the 1040, but it's got to be listed on the W2. In summary, you can see that this isn't the easiest situation to deal with. Just another reason to make sure you're talking to your tax preparer, your accountant, your CPA, and making sure they're on top of this type of thing and that they're asking you for your health insurance premium method. If they're not asking, you may have the wrong preparer. So be careful, get some good advice and get with the right type of advisor. Thanks so much and keep living that American dream. Thanks for listening and I hope that
information was helpful and let me speak
from the heart here.
I've been talking about topics like this for 1015 years. I'm a CPA attorney, best selling author, radio show host and I am passionate about helping small business owners save taxes, build wealth and protect it. Please check out the link right here. Download my free ebook on 10 Common Mistakes Small business owners make in the tax and legal arena. Also check out my social media links here. I've got Daily Tips, a weekly blog radio show every week. This information is free and I'd love to help you.
