About the Health Insurance Tax Deductions for Small Business

The cost of health insurance is not an automatic tax deduction for small businesses. There are several qualifications that must be met before health insurance is deductible.

Self-Employed

If you are a general partner in a partnership or you hold more than a 2 percent share in an S Corporation, you can deduct health insurance.

Level of Income

The deduction for health insurance cannot be more than the amount you earn from this business. (Example: If you pay yourself $10,000 in salary, you cannot deduct $12,000 in health insurance.)

Business Plan

You must set up and administer the health insurance plan in your business name (not as an individual policy).

Not Eligible for Other Plans

If you or your spouse is eligible to receive health insurance from another employer who subsidizes that plan, you cannot deduct health insurance from your business.

To Claim the Deduction

Claim this tax deduction on line 29 of your 1040 tax return. You can use the Self-Employed Health Insurance Deduction Worksheet, which is found on page 30 of the 1040 Instruction booklet.

References

• IRS: Medical and Dental Expenses
• IRS: Publication 502 Medical and Dental Expenses

Resources

• IRS Form 1040 Instructions