Can I Reimburse Myself for Health Insurance Costs Through My Company?

If you own your own business, your health insurance considerations are liable to be different than those of the typical salaried worker. For starters, the IRS permits business owners to claim their own health insurance costs as a "business deduction." This is one of the biggest incentives for American companies to provide health insurance for their workers. It's doubtful that so many companies would still provide this benefit in the absence of such a tax break. Like many business decisions, providing health insurance simply makes good financial sense.

If your business is relatively small, your health insurance considerations could be downright confusing. The tax implications of your personal health insurance plan may be confusing as well. Sole proprietors, partnerships, "S-corps" and small-business LLCs must abide by certain rules during the deduction-claiming process. Chief among these is the requirement that they provide health insurance for their employees on a pre-tax basis. If your business provides health insurance on a post-tax basis or fails to meet this standard in any other way, it may be ineligible for the health insurance tax deduction that its peer organizations enjoy. To learn more about the difference between pre-tax and post-tax health insurance benefits, you can browse the IRS's website for publications on the matter.

Many small business owners don't even provide health insurance. If your business has just a handful of employees, the financial burden of providing health insurance might not be worthwhile. While some sole proprietors establish businesses for the sole purpose of providing themselves with affordable health insurance coverage, many others simply can't afford to do so. If this describes your situation, you probably have other means of purchasing health insurance. For starters, you could turn to your spouse. If your spouse enjoys health insurance coverage through his or her employer, you might prefer to sign on to that policy.

Unfortunately, this will cut off a potentially valuable benefit: your health insurance deduction. Even though you're in business for yourself, you can't legally claim the health insurance premiums that you pay to your spouse's provider as a business expense. Such a move would constitute fraud and could be punishable by fines and imprisonment. Unless your spouse's premiums are paid out of his or her post-tax earnings, you also won't be able to claim his or her premium costs. In fact, you probably won't be able to use the health insurance deduction at all. If you want to be able to deduct your health insurance premiums as a business expense, you'll need to set up your own plan.

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