Deducting Self-Employed Healthcare Costs

If you are self-employed as a shareholder in an S corporation, and your company pays all or part of your healthcare premiums, you need to be aware of the IRS rules regarding deductions on those costs.

Any amount paid by the company should be deducted as compensation by the S corporation and included in the shareholder's gross income as wages. You may be able to deduct some of all of the reported amount on your individual tax return, to the extent allowed (by Code Sec. 162 (1)). You may also be allowed to take part of the reported benefit as a medical deduction on Schedule A of your tax return.

However, the deduction is not allowed if you, your spouse or dependent is eligible to participate in a health insurance plan through their employer.

For more information on deducting healthcare costs or any other tax issue, please contact Gray, Gray & Gray.

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