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I am an employee of a company and I have health insurance through them, pre tax. My company only pays for me so I have private insurance for my wife and kids. I also have a side business, and was told by a tax professional last year that I can write off the private insurance premiums for my family (not me) under my side business, so long as the the write-off amount does not exceed the amount of profit by the business. Note, I am the only employee of the business.

Is this true? How do I accomplish this? I assume it is somewhere on the Schedule C form.

Thanks in advance!

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No, not on schedule C, better. Its an "above the line" deduction (line 29 on your 1040). Here's the turbo tax article on it. The instructions for this line set certain limitations that you must take into the account, and yes - it is limited to the net profit from the business.

One of the following statements must be true.

  • You were self-employed and had a net profit for the year.

  • You were a partner with net earnings from self-employment.

  • You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.

  • You received wages in 2011 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.

The insurance plan must be established under your business. Your personal services must have been a material income-producing factor in the business. If you are filing Schedule C, C-EZ, or F, the policy can be either in your name or in the name of the business.

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  • OK, so I am not self employed and the plan is in my wife's name. If I'm understanding correctly, that means I am out of luck. Is that right ?
    – ctorx
    Jan 11, 2013 at 19:04
  • Yes. I thought you have a side business, isn't that what you said?
    – littleadv
    Jan 11, 2013 at 19:07
  • I do have a side business, but is a sole proprietorship. I bring in anywhere from $10K to $15K a year, but it is not an S-Corp, I don't have an office, and I don't have employees. A tax person I talked to said I could write off their premiums under this business.
    – ctorx
    Jan 11, 2013 at 19:09
  • sole proprietor is self employed by definition, what's the problem? You have to have performed personal services (i.e.: investment business or rental, for example, doesn't count), but if you file schedule SE - you're good. In the instructions there's a worksheet on how to calculate the allowed deduction amount.
    – littleadv
    Jan 11, 2013 at 19:25
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    @ctorx that I think you should ask your tax adviser. These are details pertaining your specific situation that we shouldn't be discussing here.
    – littleadv
    Jan 11, 2013 at 20:36

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