Avoid This S Corporation Health Insurance Deduction Mistake

If you own more than 2 percent of an S corporation, you have to do three things to claim a deduction for your health insurance:

  • You must get the cost of the insurance on the S corporation’s books.
  • Your S corporation must include the health insurance premiums on your W-2 form.
  • You must (if eligible) claim the health insurance deduction as an above-the-line deduction on Form 1040.

The three-step health-insurance procedure also applies under attribution rules (and this could be a surprise) to your spouse, children, grandchildren, and parents if they work for your S corporation, even if they don’t own a single share of S corporation stock directly.

You need to get this S corporation health-insurance thing right. Without the W-2 treatment, the S corporation does not get a tax deduction. 

With the correct W-2 treatment, the more than 2 percent shareholder who finds the health insurance premiums on his or her W-2 can claim the self-employed health insurance deduction on Form 1040, provided he or she is not eligible for employer-subsidized health insurance through another job or a spouse’s job.

 

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Avoid This S Corporation Health Insurance Deduction Mistake

If you own more than 2 percent of an S corporation, you have to do three things to claim a deduction for your health insurance:
You Must…

QBI Issue When Your S Corp Is a Partner in a Partnership

It’s common to consider making your S corporation (versus yourself) a partner in your partnership: it saves you self-employment taxes.

Does this affect your Section 199A deduction? It does.

Can the IRS Require Odometer Readings with the Mileage Rate?

Do you claim your business miles at the IRS optional rate? If so, imagine you are now being audited by the IRS for your business mileage. The IRS has requested odometer readings for your vehicle. You might wonder if the IRS can do this…

Want to know more?  Have some tax questions of your own?  Get in touch with us and we’ll guide you thru the tax and accounting process.

7 + 1 =

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Tax Reform Cuts Deductions for Employee Meals to 50 Percent

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Divorce? Alimony? Tax Reform Says Get Divorced Now—Don’t Wait!

Divorce? Alimony? Tax Reform Says Get Divorced Now—Don’t Wait Tax reform changes the alimony game. This may or may not have any relevance to you, but if it does, you will want to move quickly. The Tax Cuts and Jobs Act (TCJA) eliminates tax deductions for alimony...

Tax Reform: Planning for Your New 20 Percent Deduction

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Reduce Self-Employment Taxes by Renting from Your Spouse

Reduce Self-Employment Taxes by Renting from Your Spouse As a sole proprietor, you know that the 15.3 percent self-employment tax can eat up your profits in a nhurry.  You may be able to use a simple strategy to ease this tax burden. If you own an office building or...

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Tax Planning for Snowbirds

Tax Planning for Snowbirds You can plan your tax-deductible business life to avoid cold winters and hot summers. Spend a moment examining the following four short paragraphs that contain the basic facts from the Andrews case. For six months of the year, from May...

Tax Reform Destroyed State and Local Tax Deductions—Fight Back

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IRS Rules for Deducting Your Business Gym

IRS Rules for Deducting Your Business Gym If you have been thinking about the fitness of your employees and the possibility of a gym or other athletic facility, then you need to know the tax rules.  To be tax deductible, your gym or other athletic facility must be...

Reduce Your Taxes by Making Your Spouse a Business Partner

Reduce Your Taxes by Making Your Spouse a Business Partner Tax reform changed the rules of the game when choosing your best tax structure. In looking over the possibilities, a properly structured spousal partnership could be your best choice. Here are the tax benefits...

Tax Reform Expands Your Section 179 Deduction Privilege

Tax Reform Expands Your Section 179 Deduction Privilege The new and improved Section 179 deduction gives you more ways to take advantage of immediate tax deductions. It’s somewhat like having a flexible tax shelter in your back pocket for when you need it (and also...

How the 90-Day Mileage Log Rule Works for You

How the 90-Day Mileage Log Rule Works for You Often in an IRS audit, the examiner will ask for your mileage log at the beginning of the audit. If you do not have a mileage log, then you are in danger of losing more than just vehicle deductions. Think about it. If you...

Will Renting Your Home Destroy Your $250,000 Exclusion?

Will Renting Your Home Destroy Your $250,000 Exclusion? The days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes are gone. Here’s how the $250,000/$500,000...

Be Alert to the TCJA Tax Reform Attack on IRA Recharacterizations

Be Alert to the TCJA Tax Reform Attack on IRA Recharacterizations When you convert your existing traditional IRA into a Roth IRA and then reverse the transaction by switching the account back to traditional IRA status, the reversal is called a recharacterization in...

Tax Reform Changes Affecting Partnerships and LLCs and Their Owners

Tax Reform Changes Affecting Partnerships and LLCs and Their Owners The Tax Cuts and Jobs Act (TCJA) includes several changes that affect partnerships and their partners, and LLCs that are treated as partnerships for tax purposes and their members. Most of the changes...

Changes to Your Tax-Free Supper Money

The Tax Cuts and Jobs Act (TCJA) Changes to Your Tax-Free Supper Money Here’s how the TCJA applied its tax reform to your supper money meal allowances. Before tax reform, you deducted 100 percent of the supper money cost. Now, because of tax reform, your tax deduction...

Convert Your Personal Vehicle to Business and Deduct up to 100 Percent

Convert Your Personal Vehicle to Business and Deduct up to 100 Percent You probably like your personal vehicle just as it is. But wouldn’t you like it far better if it were producing tax deductions? Perhaps big deductions, immediately. And the Tax Cuts and Jobs Act...

How Cost Segregation Can Turn Your Rental into a Cash Cow

How Cost Segregation Can Turn Your Rental into a Cash Cow Cost segregation breaks your real property into its components, some of which you can depreciate much faster than the typical 27.5 years for a residential rental or 39 years for nonresidential real estate....

Retirement Plan and IRA Rollover Advice

Retirement Plan and IRA Rollover Advice When moving your retirement money to an IRA, you should follow this one rule of thumb. If you fail to follow the rule we’re about to reveal, you can face two big problems: First, your check will be shorted by 20 percent. Second,...

Tax Time Bomb: Passive Foreign Investment Companies

Tax Time Bomb: Passive Foreign Investment Companies Passive foreign investment companies, or PFICs, are subject to some of the most complex provisions of the tax law. You may own one and not even know it. A passive foreign investment company is any foreign corporation...

How to Find Your Section 199A Deduction with Multiple Businesses

How to Find Your Section 199A Deduction with Multiple Businesses If at all possible, you want to qualify for the 20 percent tax deduction offered by new tax code Section 199A to proprietorships, partnerships, and S corporations (pass-through entities). Basic...

Help Employees Cover Medical Expenses with a QSEHRA

Help Employees Cover Medical Expenses with a QSEHRA If you are a small employer (fewer than 50 employees), you should consider the qualified small-employer health reimbursement account (QSEHRA) as a good way to help your employees with their medical expenses. If the...

Does Your Rental Qualify for a 199A Deduction?

Does Your Rental Qualify for a 199A Deduction? The IRS, in its new proposed Section 199A regulations, defines when a rental property qualifies for the 20 percent tax deduction under new tax code Section 199A. One part of the good news on this clarification is that it...

New IRS 199A Regulations Benefit Out-of-Favor Service Businesses

New IRS 199A Regulations Benefit Out-of-Favor Service Businesses If you operate an out-of-favor business (known in the law as a “specified service trade or business”) and your taxable income is more than $207,500 (single) or $415,000 (married, filing jointly), your...

Take Money Out of Your IRA at Any Age Penalty-Free

Take Money Out of Your IRA at Any Age Penalty-Free You probably think you can’t take money out of your IRAs before age 59 1/2 unless you meet a narrow exception to the unpleasant 10 percent penalty on early distributions. But that’s not true. We have a variety of...

Drive Time Increases Odds of Deducting Rental Property Losses

Drive Time Increases Odds of Deducting Rental Property Losses Your rental properties provide tax shelter when you can deduct your losses against your other income. One step to deducting the losses is to pass the tax code’s 750-hour test. And one step to finding the...

Changes to Net Operating Losses After Tax Reform

Changes to Net Operating Losses After Tax Reform Tax reform made many good changes in the tax law for the small-business owner. But the changes to the net operating loss (NOL) deduction rules are not in the good-changes category. They are designed to hurt you and put...

IRS Says TCJA Allows Client and Prospect Business Meal Deductions

IRS Says TCJA Allows Client and Prospect Business Meal Deductions In Notice 2018-76, the IRS states that client and prospect business meals continue as tax deductions under the Tax Cuts and Jobs Act. This is very good news indeed. Under this new IRS guidance, you may...

Tax Reform and the Cannabis Industry

Tax Reform and the Cannabis Industry You won’t get a Section 199A tax deduction for your cannabis business. But some of the other tax reform changes may make the C corporation a more attractive choice of entity than before.Let’s look at an example. Say the cannabis...

Defining “Real Estate Investor” and “Real Estate Dealer”

Defining “Real Estate Investor” and “Real Estate Dealer” The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules...

Avoid the 1099 Prepaid-Rent Mismatch

Avoid the 1099 Prepaid-Rent Mismatch Two questions:Did you prepay your 2019 rent so that you have a big 2018 tax deduction?How do you identify in your accounting records the monies you put on your IRS Form 1099-MISC for the business rent payments to your landlord? For...

Answers to Common Section 199A Questions

Answers to Common Section 199A Questions For most small businesses and the self-employed, the 20 percent tax deduction from new tax code Section 199A is the most valuable deduction to come out of the Tax Cuts and Jobs Act.The Section 199A tax deduction is complicated,...

Avoiding the Kiddie Tax after Tax Reform

Avoiding the Kiddie Tax after Tax Reform If your family has trouble with the kiddie tax, you face some new wrinkles for tax years 2018 through 2025 thanks to the Tax Cuts and Jobs Act (TCJA) tax reform. This is one of the many areas where tax planning can pay off. For...

Tax Reform’s New Qualified Opportunity Funds

Tax Reform’s New Qualified Opportunity Funds Qualified opportunity funds are a new tax-planning strategy created by the Tax Cuts and Jobs Act tax reform. The new funds have the ability to defer current-year capital gains, eliminate some of them later, and then on the...

IRS Issues Final Section 199A Regulations and Defines QBI

IRS Issues Final Section 199A Regulations and Defines QBI Your ownership of a pass-through trade or business can generate a Section 199A tax deduction of up to 20 percent of your qualified business income (QBI). The C corporation does not generate this deduction, but...

IRS Clarifies Net Capital Gains in Final 199A Regulations

IRS Clarifies Net Capital Gains in Final 199A Regulations New tax code Section 199A can give you a tax deduction of up to 20 percent of your taxable income reduced by net capital gains. In new final regulations, the IRS has provided clarity on the capital gains...

IRS Creates a New “Safe Harbor” for Section 199A Rental Properties

IRS Creates a New “Safe Harbor” for Section 199A Rental Properties The Section 199A 20 percent tax deduction is a gift from lawmakers—literally. You don’t earn this deduction; it’s simply there for you if you qualify. Under the trade or business rule, your rental...

IRS Updates Defined Wages for New Section 199A Tax Deductions

IRS Clarifies Net Capital Gains in Final 199A Regulations Your Section 199A tax deduction will benefit from your business’s W-2 wages paid to you and your employees if you are married and filing jointly and your taxable income is over $315,000 and less than...

Good News: Most Rentals Likely Qualify as Section 199A Businesses

Good News: Most Rentals Likely Qualify as Section 199A Businesses The Tax Cuts and Jobs Act tax reform added new tax code Section 199A, which created a 20 percent tax deduction possibility for you if your rental property (a) has profits and (b) can qualify as a trade...

How to Reimburse Medicare When You Have Fewer Than 20 Employees

How to Reimburse Medicare When You Have Fewer Than 20 Employees The Affordable Care Act’s $100-a-day penalty for improper medical reimbursements likely has your attention. And it should. But you can find many reimbursements that are allowed without penalty, including...

What Can I Do If My K-1 Omits 199A Information?

What Can I Do If My K-1 Omits 199A Information? Tax reform’s Section 199A deduction often confuses small-business owners and tax professionals alike. It’s quite possible you’ll get a Schedule K-1 from a business that omits the information you need to calculate your...

Terminating Your S Corporation Election

Terminating Your S Corporation ElectionTax reform may have you thinking of changing your S corporation to a C corporation, partnership, or sole proprietorship. With such a switch, you need to consider: How do I terminate the S corporation election correctly? What are...

Backdoor Roth IRA Opportunities Still Available After TCJA

TCJA Tax Reform Sticks It to Business Start-Ups That Lose Money Good news. The Tax Cuts and Jobs Act (TCJA) didnot harm the backdoor Roth strategy. As you likely know, the Roth IRA is a terrific wayto grow your wealth with a minimum tax downsidebecause you pay the...

Combine Home Sale with the 1031 Exchange

Combine Home Sale with the 1031 ExchangeYou don’t often get the opportunity to even consider making a tax-saving double play. But your personal residence combined with a desire for a rental property can provide just such an opportunity.  The tax-saving strategy is to...

Know These Tax Rules If Your Average Rental Is Seven Days or Less

If you own a condominium, cottage, cabin, lake or beach home, ski lodge, or similar property that you rent for an “average” rental period of seven days or less for the year, you have a property with unique tax attributes.

Can the IRS Require Odometer Readings with the Mileage Rate?

Do you claim your business miles at the IRS optional rate? If so, imagine you are now being audited by the IRS for your business mileage. The IRS has requested odometer readings for your vehicle. You might wonder if the IRS can do this…