I’m a W2 employee and so is my spouse. I also own a single member LLC. Both our companies offer us health insurance and subsidize it for us, but do not subsidize it for our kids. I’m trying to understand if I could use the self-employed health insurance deduction to deduct the cost of health insurance just for my kids from my LLC income. I keep seeing how it says you can’t if you’re covered through your work or through your spouse’s work but nothing says anything about if your kids are eligible for subsidized health insurance or not. So since I’m covered through my work plan, am I automatically ineligible, even for my kids? Or is there a possibility to use the deduction just for insurance for my kids? [It costs a lot to insure them so I’d love to be able to deduct it if possible!]
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1I'm really surprised your employers don't offer "family" insurance plans. I don't think I've ever worked for a company that subsidized insurance without offering something like this. But I'm not married so maybe I didn't pay close attention to that part.– BarmarCommented Aug 12 at 14:30
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They’ll cover our kids but we’ll have to pay the full price of about $1,000 monthly– Michelle OnakaCommented Aug 13 at 20:12
2 Answers
No, you cannot deduct the cost of health insurance for your kids from your LLC income. Even if we assume that the LLC income is earned income (and not, for example, passive income from real estate holdings), you can only deduct insurance that covers you (with or without your dependents).
That said, if you cover your kids through your employer, it should be a pre-tax deduction, so if the concern is about the tax benefit and the cost is the same either way - why don't you include them in your employer coverage?
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3Additionally, just being eligible for an employer-sponsored policy as a W-2 employee or the dependent of a W-2 employee (e.g. as the spouse) disqualifies you from the SEHI deduction altogether.– Stan HCommented Aug 11 at 19:38
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Through my employer it costs an extra $1,000 a month to cover my kids, whereas to cover me and my kids through the exchange it costs $850 and my employer gives me about $250 for it. So even though I don’t get to save on taxes, I’m looking at a total cost of $600 instead of $1,000 pretax. Also, I can get an HDHP and HSA that way Commented Aug 12 at 13:45
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@MichelleOnaka both employers? Time to look for a job, probably... Commented Aug 12 at 17:01
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Ya both employers will cover us but won’t subsidize our kids at all. Both companies have like 7 employees and we love our jobs so that won’t be changing anytime soon Commented Aug 13 at 20:11
The big problem you will have is you will have to wait for open season, unless there is been a recent loss of coverage. If you try and add the children to your coverage, or to your spouses, or if you pick a plan under the affordable care act it must be open season or it must be a Qualifying life event (QLE)
So if this loss of coverage is very recent check the deadline to see if you can even get insurance for them, or if you have to wait to late in the year for an ACA policy, or if you have to wait until whenever your employers have open season. Depending on the dates you might have to pick the most expensive of the three until the least expensive one is available.
Going through either employer will make the premium a pre-tax deduction from your income. That will bring the cost down.
If they are uninsured for too long you may also run into the issue that any preexisting conditions might not be covered, or they may have a waiting period.
There is also an option for a short-term coverage policy. They don't meet the requirements for an affordable care act policy. They don't cover as much, and they could be expensive.
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We already have insurance, this is me trying to figure out if our current insurance set up is the right one for the coming year Commented Aug 12 at 13:47