Tax Deductible Health Care Expenses for Business Owners
By Spaycial on Apr 29, 2009 in Finance
If you own a small business, don’t forget that your health insurance is tax deductible — both what you pay for your own, and what you pay for your employees’. The former is simply a tax deduction on your personal tax return, while the latter is considered a cost of doing business.
Let’s talk about your own health insurance first. If you are self-employed and have to buy your own health insurance because you can’t get it via a group plan anywhere else, you can deduct it on line 29 of your 1040. The exception is bolded because it’s worth repeating — you only get this deduction if you can’t get health insurance another way. For instance, if your spouse has a group plan and you can be covered under it, you don’t get this deduction for the months when that was available — even if you choose to buy your own health insurance anyway.
For example, if you buy your own health insurance, but then your spouse gets a job and you eligible for coverage under his or her group plan in July, you can only deduct your individual plan’s premiums for the first six months of the year — even if you chose to continue your plan.
There is also a mildly complicated way of determining the maximum deduction available to you, which you can read about in this article on the health insurance deduction.
On the other hand, if you have employees and get a group plan for all of you (including yourself), you deduct that as a business expense on Schedule C. Now your health insurance is considered a cost of doing business, because it’s part of the benefits package you offer your employees. This cost is entered into Schedule C, line 14.
The latter deduction also applies to any other benefits you offer your employees: dental insurance, vision insurance, life insurance, etc. So if you offer dental insurance so that your employees can afford to go to the best Washington DC dentists, you can deduct that expense as the cost of doing business.
Now, there are some other, non-business related health care deductions you can get on your taxes — for instance, if you spend more than 7.5 percent of your income on health care, you can deduct the amount over 7.5 percent from your gross income on Schedule A (but you have to itemize to do so). So if you required a lot of sedation dentistry in DC, kicking the amount you spent on health care during the year above 7.5 percent of your income, you may have a tidy deduction you can use to reduce your tax liability.
There are so many tax deductions that people don’t take because they don’t know about them. Be sure to do your research and know what you can and can’t deduct, so that you don’t end up paying more in taxes than you should!