How do Partnerships take the Section 106 Deduction for Health Insurance?

You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business.

  1. Insurance that covers fire, storm, theft, accident, or similar losses.

  2. Credit insurance that covers losses from business bad debts.

  3. Group hospitalization and medical insurance for employees, including long-term care insurance.

    1. If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners.  Publication 535  *  

     

The insurance plan must be established under your business.

For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual.

For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065)

 
as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan won’t be considered to be established under your business.

See self employed rules.  Ask us for a copy of Q & A # 8747 on Health Insurance for Partners & Sole Proprietors

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