health insurance business expense

Can Health Insurance Be a Business Expense?

Can health insurance be deducted as a business expense?

While many individuals qualify for a deduction on their taxes when they pay their own health insurance, only businesses can deduct health insurance as a business expense.

A company that provides group health insurance for its employees gets to write off that cost as a business expense. Individuals, including small businesses owners, who buy their own health insurance may also take federal income tax deductions for health insurance premiums. Individuals, however, take personal deductions, not business expenses.

Self-Employed Health Insurance Deduction

Self-employed individuals may be eligible to deduct up to 100% of their health insurance premiums for themselves, their spouses, and dependents. This deduction applies only to your federal, state, and local income taxes, not your self-employment taxes.

The deduction for self-employed health insurance premiums is a valuable tax break if you qualify.

To qualify for the deduction, you must meet two requirements:

  • You Have No Other Health Insurance Coverage: You may not take the self-employed health insurance deduction if you are eligible to participate in a health insurance plan maintained by your employer or your spouse’s employer.
  • You Have Business Income: You may deduct only as much as you earn from your business. You get no deduction if your business earns no money or incurs a loss. If you have more than one business, you cannot combine the income from all your businesses for purposes of the income limit. You may only use the income from a single business you designate to be the health insurance plan sponsor.

The IRS allows you to select a standard deduction or itemize your medical expenses when filing for tax deductions. The option you choose will depend on how many medical expenses you have incurred during the past year. Write-offs are available whether or not you itemize if you meet the requirements.

Eligibility is determined month-by-month

You can only claim the health insurance premiums write-off for months when neither you nor your spouse were eligible to participate in an employer-subsidized health plan.

Deducting Health Insurance Premiums if You’re Self-employed

You can claim the self-employed health insurance deduction for the following premiums:

  • Health insurance
  • Dental policies
  • Medicare (Parts A, B, C and D)
  • Long-term care coverage

If you are self-employed, your allowable medical expense threshold decreases to 7.5%. For example, if your Adjusted Gross Income (AGI) was $100,000, then you would be able to deduct any medical expenses that exceeded $7,500.

Independent contractors also are able to receive the self-employed health insurance deduction.

Are Health Insurance Premiums Deductible on Federal Taxes?

Health insurance premiums are deductible on federal taxes, as these monthly payments for coverage are classified as a medical expense. The general rule is that if you pay for medical insurance with out-of-pocket money, you would be allowed to deduct the amount from your taxes.

If you purchased a federal marketplace health insurance plan and did not receive premium subsidies, you would be able to take a tax deduction. Since the premiums for this Obamacare policy would be paid out-of-pocket, you could deduct the expenses while filing your taxes. If you did receive premium subsidies, only the portion that you pay yourself would be allowed to be deducted. 

Any medical expenses you are reimbursed for, like copays, would not be allowed to be deducted.

Looking For a Group Health Insurance Plan?

If you are looking for a group health insurance plan for your business, I can help you navigate a wide range of options in various states to ensure that you can find the coverage that fits the needs and budget of your company. Call me at (912) 660-5236 or go online for a no-cost, no-obligation appointment to assess your needs.