Tax Breaks for Business Owners 

Employers who are self-employed may be able to take deductions related to the costs they pay for health insurance plans, to offset their taxable income. Read on to learn more, and be sure to speak with your tax professional to confirm your eligibility. 

Self-Employed Health Insurance Deduction 

The self-employed health insurance deduction allows some self-employed taxpayers to deduct 100% of health insurance premium costs paid during the applicable year to offset the cost of medical expenses. Eligible costs include premiums for medical, dental, and vision insurance, qualified long-term care insurance, and Medicare (Parts A, B, C, and D). Eligible taxpayers can include premiums paid on coverage for the taxpayer, their spouse, and any dependents or non-dependent children under age 27. 

 To be eligible, one of the following must be true about the taxpayer: 

• They are reporting a net profit on Schedule C or F (Form 1040). 

• They are a partner (with earnings reported on Schedule K-1, box 14, code A) or shareholder owning more than 2% of a S-corporation (with wages reported on Form W-2). 

In addition, the insurance plan must be established under the business, either in the name of the business or the individual, partner, or shareholder, as applicable (though, as noted above, Medicare premiums also qualify). One caveat is taxpayers are only eligible if they do not have access to participate in an employer-sponsored subsidized health insurance plan, such as if a spouse has coverage through their employer. 

Health Savings Account (HSA) Deduction 

A health savings account (HSA) is a tax-advantaged savings account that can be established by participants in a high-deductible health plan (HDHP), allowing them to set aside pre-tax dollars to be used for qualified medical expenses. Unused dollars can be carried forward year after year, even into retirement. 

 Contributions that you make directly to your HSA are tax deductible; in contrast, contributions made through a payroll deduction are not tax deductible. Please be aware of annual contribution limits for HSA accounts set by the IRS, because any excess contributions are not tax deductible. 

For More Information 

If you’d like to learn more about HSA plans or other employee benefits programs, please contact our Benefits team at (210) 640-1789, toll-free at 1-888-757-2104, or be******@**********rs.com. 

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate, we recommend you consult a professional tax advisor or lawyer.