As a business owner, one of the most important things you need to do is to find ways to reduce your taxes.
Reducing your tax is 100% legal so there's no reason to be intimidated or scared.
The IRS doesn't need your money. You just need to make sure you legally adopt strategies inside of your business to reduce and minimize your tax as early as you can.
What is Self-Employed Health Insurance?
One of the many ways to do reduce your taxes is through your self-employed health insurance deduction. Self-employed health insurance is an individual or company policy for insurance that you pay for personally or through the business. It is not a form of group health insurance or any type of medical sharing plan. Your self-employed health insurance is a separate deduction against your income on page 1. So it's not a straight deduction from your business income and it's not listed on Schedule C, but it is deductible from your income on your personal tax return.
Paying as a Sole Proprietor, Single-Member LLC, or LLC Taxed as a Partnership
Typically, health insurance is paid on a monthly basis. At the end of the year for tax purposes, you need to know how much money you paid in your premiums because that's a 100% deduction on your tax return. It's deductible on Schedule 1 of your 1040.
Paying Through S Corp
If you're an owner of the S corp, whether it's a majority owner or part-owner, and higher than a 2% shareholder, make sure your premiums are included in your W2 (even if you have a personal policy) in order for you to get the tax advantage of self-employed health insurance.
What About the C Corp?
The C Corp is an animal in and of itself so it does not have any flow-through income. You have ownership but outside of that, everything's contained within the C corp. In order for those premiums to be deducted, it needs to be a company policy. It needs to be paid for through the company. So if you have a policy and you pay for it through the C Corp, it's an expense of the C Corp, and there's no impact to you personally.
If you want to learn more about self-employed health insurance tax advantage, check out 030: Ins & Outs of How to Treat Self-Employed Health Insurance
