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Assume the following situation:

My wife and I own a LLC in a community property state. (50/50) We are self-employed and have no employees. Under this arrangrement, business income flows through to personal return.

Let's assume, my wife and I each generate $12000 in profits through self-employed work (freelancer) under the LLC umbrella, for a total of $24000. We have health insurance through an exchange plan. The plan is in my name. Health insurance costs are $24000 annually.

I know that I can deduct health insurance premia up to the profits from my business.

But, what is the right number here for business profits: $12000 (what I contributed through my work to profits from our jointly owned businss) or $24000 (profits from both me and my wife operating through the LLC).

Thanks!

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  • Do you file a separate Schedule C for you and your wife (each with $12,000 in profit), or is there only one Schedule C for your LLC on your return ($24,000)?
    – Ben Miller
    May 15, 2021 at 3:35
  • I guess therein lies the question: do we need to file separate Schedule Cs (in which case deduction is limited to 12k) or just one (in which case we could deduct the whole 24k)? At this stage, having done some more research after posting, I’m pretty certain there need to be separate Cs, but I’m curious to see if there are other opinions/approaches/alternatives.
    – tmwn6919
    May 16, 2021 at 2:21
  • @tmwn6919 Deducting your premium is great and all, but I'd go right ahead and get a SHOP plan and your Small Business Health Care Tax Credit.
    – SAH
    Jun 23, 2021 at 22:13
  • not sure this will work. healthcare.gov says: “ Note: To qualify for SHOP, you must have at least 1 FTE employee other than owners, spouses, and family members of owners, and partners.” there is no one but me and my wife, so I don’t think we qualify.
    – tmwn6919
    Jun 24, 2021 at 23:21

1 Answer 1

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See Worksheet 6-A: Self-Employed Health Insurance Deduction Worksheet in Publication 535: Business Expenses. On lines 4-6 it takes into account multiple Schedule C's, but the health insurance plan being established under only one of them.

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  • Thank you - accepted answer. Here is another good way to put it: "The amount of the deduction cannot exceed your share of the net profit of your LLC." Thus, if the total profit of the LLC is $24K and I own 50% of the LLC, then I can only deduct up to $12K for health insurance.
    – tmwn6919
    May 20, 2021 at 20:35

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