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fcarbone
Level 3

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

I split the LLC with my wife, we both have unreimbursed mileage and medical expenses against the  LLC. Is it more efficient to Write mileage off when doing the K-1 as unreimbursed expense, or write it off with each of us doing a Schedule C Sole Proprietorship .

 

For medical, do we do the same thing, use schedule C Sole Proprietorship ?

1 Best answer

Accepted Solutions
AmeliesUncle
Level 12

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

The Self Employed Health Insurance deduction also applies to Partners (and >2% shareholders in a S-corporation).  It is first added to their Guaranteed Payments (or wages for a S-corporation shareholder).  The *IF* the taxpayer qualifies, they can use the Self Employed Health Insurance deduction on Schedule 1.

https://www.irs.gov/publications/p535#en_US_2019_publink[phone number removed]

 

When entering the K-1, there is a check-box about health insurance (although it is VERY poorly worded).  Check that box and the followup questions should do it.

View solution in original post

9 Replies
Opus 17
Level 15

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

Unless you live in a community property state, it is not legal to file 2 schedule C’s for a multimember LLC, even if the two members are spouses. You must file a separate partnership tax return.  Your LLC’s tax return was due March 15, not April 15, and unless they extended the deadline for partnership returns as well, the penalty for late filing is $195 per month per member.

 

Since you can’t deduct business mileage on a personal tax return in most cases, if you are filing a partnership tax return for a multimember LLC, it will be more beneficial for the LLC to adopt an accountable expense plan and reimburse your legitimate business expenses rather than putting them on your personal tax return.

 

If you do live in a community property state, you have the option of treating a LLC were the only two members are spouses, as if it was two separate disregarded entity’s, each on a schedule C. You must split the income and expenses exactly 50-50. Again, it will be better to treat your expenses as it reimbursed business expenses under an accountable expense plan, presuming you do the documentation to keep everything straight in case of an audit.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
fcarbone
Level 3

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

Thank You,

 

So my partnership extension was filed by March 15, and I am in NY, not a community property state. After I file Form  1065, and generate K-1'S, which will have my unreimbursed miles, I am still left with medical to write off and it appears I need to file Schedule C to pass the K-1's thru to each of us.

 

From what I have been reading, we both need to file schedule C's to write off Medical Premiums, unless there is a better way. Is that correct?

AmeliesUncle
Level 12

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

No, you don't do ANYTHING with a Schedule C.  There is a separate section that will ask you to enter your K-1s, and that section will ask you everything, including about any unreimbused expenses and medical insurance.

Opus 17
Level 15

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

@Carl can you add anything?

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Carl
Level 15

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

can you add anything?

A little bit.

So my partnership extension was filed by March 15, and I am in NY, not a community property state........ we both need to file schedule C's

You need to forget about SCH C. You live in NY, so that's not an option for you.

After I file Form 1065, and generate K-1'S, which will have my unreimbursed miles,

No. The K-1 would include money paid to you for "REIMBURSED" miles - not "UN"reimbursed miles. That money would be taxable income too. Remember, a partnership isn't just a pass-through entity, it's also a disregarded entity.

 

I am still left with medical to write off

Your medical expenses are an itemized deduction on SCH A, subject to a number of limitations/requirements before they will have any impact on your personal 1040 tax return. If the partnership did not have a qualified medical plan or medical insurance plan in place in 2019, then the bottom line is, medical expenses are a SCH A deduction on the personal 1040 return of each partner. (Filing MFS will *NOT* make things better either - it will make them worse.)

If the partnership (not the individual partners) provided health insurance to the partners, and the partnership (not the individual partners) was legally obligated to pay it on behalf of all the partners, then the amount paid by the partnership would be shown in box 13 of the K-1 with code "M".  That amount in box 13 with code "M" would be transferred to the SCH A of the partner's 1040 tax return. So it's "still" a SCH A itemized deductions subject to the limits and requirements imposed on itemized deductions.

AmeliesUncle
Level 12

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

Carl, if the Partnership paid for health insurance (either directly or by reimbursing the Partners), that amount is added to Box 4 and 14 of the K-1, and it then potentially qualifies for the Self Employed Health Insurance deduction on Schedule 1.

Carl
Level 15

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

@AmeliesUncle I'm having a hard time following the flow of the numbers with that, with the claim it's deductible. With it in box 4 and 14 it's still taxable income to the recipients. If they want to claim the portion of box 4/14 for medical, it's still a SCH A deduction on the 1040. Since there is no SCH C, I don't see how SCH 1 fits into this with the K-1. I can't find "a flow" for anything related to medical (including insurance) from the K-1 to the SCH 1.

Am I still missing something?

AmeliesUncle
Level 12

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

The Self Employed Health Insurance deduction also applies to Partners (and >2% shareholders in a S-corporation).  It is first added to their Guaranteed Payments (or wages for a S-corporation shareholder).  The *IF* the taxpayer qualifies, they can use the Self Employed Health Insurance deduction on Schedule 1.

https://www.irs.gov/publications/p535#en_US_2019_publink[phone number removed]

 

When entering the K-1, there is a check-box about health insurance (although it is VERY poorly worded).  Check that box and the followup questions should do it.

View solution in original post

fcarbone
Level 3

I am 50% partner in an LLC, I pay for own gas and medical premiums. How do I effectively write that off.

Thank You AmeliesUncle,

Guaranteed payments, (B), Total Medical Premiums paid by the LLC.

Got it!

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