Can Medical Expenses be deducted as a Business Expense for Self-Employed?

[cameaf]

Only your medical insurance premiums qualify for the self-employment medical expenses deduction. You can also include medical insurance premiums for your spouse, your dependents and any of your children who are under age 27 at the end of the year, even if that child is not your dependent. 

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.

If you have any other out of pocket medical expenses, those can be deducted on Schedule A, Itemized Deductions subject to 10% of your AGI limitation. 

In order to enter the Health Insurance Deduction into TurboTax, 

• Login to TurboTax Self Employed

• Click Take me to my return 

• Click the Business tab, then Continue

• Click I'll Choose What I Work On

• Scroll down and click Start (or update) next to Self-employed Health Insurance

• Continue to answer the remaining questions regarding your Health Insurance.

https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/Deducting-Health-Insurance-Prem...

[ewallace]

Owner-employees may be able to take advantage of similar benefits, but only if they do some extra planning for their business. As usual, the business must have a formal medical plan in writing. Rules for LLCs will follow the business structure they have elected for tax purposes.

When you own a regular C-corporation, as an employee of your corporation you are entitled to all the benefits described above. However, remember, you must be on payroll to qualify for employee benefits. Don’t short-change yourself by taking draws instead of payroll. Not only do you lose the right to all these benefits, you will also face IRS penalties for not taking wages or salaries.

S-corporations cannot offer benefits to shareholders who own 2% or more of the company. There are a whole host of restrictions when it comes to shareholders, and the spouses of shareholders. However, IRS Revenue Ruling 91-26 allows the S-corporation to pay health-insurance premiums for shareholder-employees, as long as the premiums are added to wages. The employees may deduct those premiums on their personal tax returns as self-employed health insurance.

Partnerships and sole proprietorships (Schedule C) may only deduct medical expenses on their business return if the owner hires his/her spouse. The spouse cannot just be on payroll in name only. Many business owners and tax-deduction promoters have gotten into deep trouble for this practice. The spouse must actually work for the business (keep time cards or other proof of employment). The business can provide full family health insurance and medical reimbursements to the spouse-employee.