General Partners and LLC members who are considered general partners can claim the Self-Employed Health Insurance (SEHI) deduction as an adjustment to income on Schedule 1 of Form 1040, rather than a deduction on Schedule A. This is a more advantageous option than claiming it as an itemized deduction on Schedule A. Medical expenses claimed on Schedule A are not deductible until they exceed 7.5% of your adjusted gross income.
A policy can be either in the name of the partnership or in the name of the partner. The policy can include you, your spouse, dependents, and any children under age 27 who are not dependents.
You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1 in box 13 with a code M.
Here are the steps to ensure you get the SEHI Deduction associated with your partnership income reported on your Schedule K-1 (Form 1065):
- Open your tax return, if you haven't already
- Select Federal, then Wages & Income (this may show as Wages & Expenses depending on your program)
- Scroll down and select Show more next to S-Corps, Partnerships, and Trusts
- Start Schedule K-1
- On the Did you receive any Schedules K-1? screen, select Yes
- Select Start next to Partnerships/LLCs (Form 1065)
- On the Partnership Name and Address screen, enter the info and select Continue
- Continue entering your info
- Once you get to the Check Boxes That Have an Amount screen, your K-1 should have an amount for Self-Employment Income and, if your partnership paid for the SEHI, an amount for box 13 with a code M.
- You may have any number of other boxes that have amounts listed, as well
- Once you have completed the entry of your box 13 code M (if applicable) and box 14 (required for a SEHI deduction), select Continue
- Enter any remaining info for the other boxes on your K-1
- On the Describe the Partnership screen, if you paid your own insurance premiums, check the box next to I personally paid health insurance and/or long-term care insurance premiums for myself and my family
- If you checked the above box, you’ll see the Unreimbursed Partnership Expenses screen, Select Yes
- Continue through the screens until you reach the screen for Any Self-Employed Insurance Costs? Enter any amounts you paid personally on these screens
Once you’ve completed your Schedule K-1 entry, your premium amounts will show as a Self-Employed Health Insurance Deduction on Schedule 1, line 17.
Note: Your deduction for SEHI may be limited by the amount of the self-employed income reported by the partnership (less the self-employment tax on that income).