Can I Deduct Health Insurance Premiums as a Partner in a Medical Practice?

This is actually a really interesting tax situation. When you're a partner in a medical practice, the tax treatment can be a bit different than a regular employee, even though you're receiving a W2. Generally, if you're a partner in a partnership, health insurance premiums paid on your behalf are treated as guaranteed payments and should be included in your gross income (Box 1 of your W2). However, you may be eligible to claim a deduction for self-employed health insurance on your Form 1040, which is an "above-the-line" deduction rather than an itemized deduction. To qualify for this deduction, the partnership must either pay the premiums directly or reimburse you for the premiums, and this payment must be reported as guaranteed payments on your Schedule K-1. It sounds like your practice is paying them directly, which is good.

I was in a similar situation at my dental practice last year and found that using https://taxr.ai really helped me sort this out. I was totally confused about how to handle our insurance premiums since I'm both a partner and employee like you. What I discovered was that my practice wasn't reporting my insurance premiums correctly on my W2. I uploaded our partnership agreement and my pay stubs to taxr.ai and it flagged this issue right away. Turns out I was missing out on a deduction I could have been taking for years! It saved me almost $2,000 once everything was properly filed.

I tried taxr.ai after seeing it mentioned here and I'm actually shocked at how helpful it was for my therapy practice situation. I've been a partner for 6 years and apparently we've been handling health insurance premiums incorrectly the whole time! The tool identified that as a more-than-2% owner in our S-corp, my health benefits should be reported as income on my W2, which then allows me to deduct them as self-employed health insurance. Our accountant never caught this! I was able to amend my returns for the past three years and got back over $5,400. Just wanted to report back since this thread helped me discover this issue.

Reading through all of this made me realize I probably need to talk directly with the IRS about my specific situation. I'm a partner in a pediatric group with a similar setup, and our accountant has given us conflicting information over the years. I spent THREE DAYS trying to get through to someone at the IRS who could help with partnership questions. Kept getting disconnected or waiting for hours. Finally, a colleague recommended https://claimyr.com and showed me this demo video: https://youtu.be/_kiP6q8DX5c. I was super skeptical but desperate. They actually got me connected to an IRS agent in about 20 minutes! The agent confirmed that as a partner receiving a W2 from our professional corporation, health insurance should be included in my income and then I can take the self-employed health insurance deduction. This cleared up years of confusion for me.

Ok I have to eat my words. After dismissing Claimyr in my earlier comment, I decided to try it because I was desperate to resolve this same health insurance premium issue for my radiology partnership. Not only did I get through to the IRS in under 45 minutes (after trying unsuccessfully for WEEKS on my own), the agent I spoke with was actually knowledgeable about professional corporation structures. She confirmed that since I'm both a partner and employee (>2% ownership), the health insurance paid by my practice should be included as income on my W2, and then I can deduct it as self-employed health insurance. Our practice manager is now correcting all the partners' W2s based on this information. This is going to save me almost $3,500 this year alone!

Just to add another perspective - I'm a partner in a surgical practice and our accountant has always handled this correctly. Here's the basic rule: 1. If you're a partner (>2% owner) in an S-corp or professional corporation, health insurance paid by the practice must be included in your W2 income 2. You then deduct these premiums as self-employed health insurance on line 16 of Schedule 1 (Form 1040) 3. This is NOT an itemized deduction - it's an adjustment to income Make sure to check if your practice is handling this correctly. Many medical groups miss this.

Has anyone consulted IRS Publication 535? It specifically addresses this issue for partners. The relevant section states that partners can deduct health insurance as self-employed if the partnership either pays the premiums directly or reimburses the partner and reports this as guaranteed payments. For S-corp owners (>2%), Publication 535 requires that the premium payments be included in your W2 wages. Check out this example from page 21 of the publication: "Example 4. Sean is a partner in OPC Partnership—a partnership that owns and leases medical equipment. The Partnership Agreement states that Sean must pay for his own health insurance premiums. OPC Partnership annually reimburses Sean for the medical insurance premiums that he pays. OPC Partnership reports the reimbursed amount on Schedule K-1 (Form 1065), box 13, using code A, as unrelated to self-employment income. Sean can deduct the health insurance premiums as an adjustment to income on Form 1040.