Can I deduct Self-Employed Health Insurance premiums when my family's on a separate plan?

I work full-time at a manufacturing plant that provides health insurance for me, but the premiums to add dependents are absolutely ridiculous - like $950/month just to add my husband and son! So they have their own marketplace plan that costs us about $680 monthly out of pocket. Here's my situation: I also run a small consulting LLC (taxed as an S-Corp) on the side that's been doing pretty well this year. I'm the only one who works in this business - my husband and son aren't involved at all. I've been reading about self-employed health insurance deductions and that you can deduct premiums up to your self-employment income. Since I'm getting S-Corp K1 income from my side business, can I deduct the health insurance premiums I pay for my husband and son against that income? It would be really helpful for our taxes since we're currently paying those marketplace premiums with post-tax dollars and not getting any deduction for them.

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20 comments

Raj Gupta

•8M

Yes, you can potentially deduct the health insurance premiums for your husband and son against your S-Corp income, but there are some specific requirements you need to follow. First, the S-Corp needs to either pay the premiums directly or reimburse you for them. If you're reimbursed, this should be reported as income on your W-2 from the S-Corp. Then you can take the self-employed health insurance deduction on your personal return. The key here is that the health insurance policy should be established "under your business" even though it covers your family members. Family coverage is absolutely eligible for the deduction as long as you follow the proper steps. Just make sure you're documenting everything correctly and that your S-Corp is handling the premiums appropriately.

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Raj Gupta

•8M

If you've been paying from your personal account, you still have options. The S-Corp can reimburse you before the end of the year, and that reimbursement needs to be included in your W-2 wages from the S-Corp. Keep detailed records of these transactions. If it's already past year-end, you may have more limited options, but consider discussing with your accountant about establishing a medical reimbursement plan retroactively. The key requirement is establishing that the insurance plan is "under the business" rather than just a personal expense.

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TechNinja

•8M

I went through almost exactly this situation last year with my side business and family insurance. I was so confused trying to figure it out and wasted hours reading conflicting advice online. I finally used https://taxr.ai to analyze my situation and it was a game changer. You upload your documents (I uploaded my insurance statements, S-Corp docs, and previous year's return), and it analyzes everything and explains exactly what you can deduct and how to properly document it. The analysis confirmed I could deduct my wife's premiums against my S-Corp income but showed me the specific steps I needed to take with my S-Corp to make it work properly.

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TechNinja

•8M

For my situation, it was spot-on accurate. What made it different from other tools I've used is that it actually looked at my specific documents and circumstances rather than just giving generic advice. The recommendations were tailored to my exact situation with my S-Corp and family insurance. Yes, it absolutely provides the specific forms and line numbers. It gave me step-by-step instructions for both my S-Corp return and personal return, including exactly where to report the reimbursements on my W-2 and where to take the deduction on my 1040. This was probably the most helpful part since I was doing my own taxes.

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Paolo Bianchi

•8M

Just wanted to update - I tried https://taxr.ai after reading about it here and it was exactly what I needed! I uploaded my S-Corp docs and insurance statements, and it showed me that I needed to have my business reimburse the premiums and include that amount on my W-2. The analysis explained exactly how to document everything and which forms to use. It even caught that I could go back and amend last year's return to claim premiums I missed! Already implemented their recommendations and my accountant confirmed it was the correct approach. Definitely worth checking out if you're in this situation.

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Yara Assad

•8M

If you're dealing with the IRS about this deduction issue, good luck trying to get someone on the phone for clarification. I spent FOUR HOURS on hold trying to verify how to handle a similar self-employed health insurance situation last year, only to get disconnected. I finally discovered https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that family health insurance premiums can be deducted against S-Corp income if the corporation reimburses you and includes it on your W-2. Saved me a ton of uncertainty and potentially an audit.

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Yara Assad

•8M

It uses a system that continuously dials the IRS until it gets through, then it calls you and connects you directly to the agent. It essentially does the waiting for you so you don't have to sit on hold for hours. I was skeptical too until I tried it. The system actually works - it called me back in about 15 minutes and I was talking to a real IRS agent. They use technology that monitors hold times and call volumes to optimize when to call. It's not like they have some special "backdoor" to the IRS or anything like that.

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Javier Morales

•8M

I was the skeptic on that Claimyr service, but I had a deadline coming up for resolving this exact S-Corp health insurance deduction issue. Couldn't get through to the IRS after multiple attempts, so I reluctantly tried it. Holy crap it actually works. Got a call back in about 20 minutes and was connected to an IRS representative who walked me through the exact requirements for deducting family health insurance premiums against S-Corp income. Turns out I was doing it wrong for the past two years - now I can fix it. Saved me potentially thousands in improper deductions that could have triggered an audit.

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Natasha Petrov

•8M

One thing to watch out for - there's a specific order of operations for the self-employed health insurance deduction when you have both W-2 income with employer-provided insurance AND self-employment income. The IRS wants you to first determine if your employer-subsidized coverage could have covered your family. If your employer offers family coverage (even if it's ridiculously expensive), that technically counts as "available." Some tax pros interpret this as limiting your ability to take the SE health insurance deduction.

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Natasha Petrov

•8M

There's definitely a gray area here. The strict interpretation is that if family coverage is available through your employer, you should use that instead of claiming the SE deduction - regardless of cost. However, many tax professionals take the position that "available" should be interpreted as "reasonably available" - meaning if the employer coverage is prohibitively expensive (which $950/month could certainly qualify as), then the SE deduction is justified. Just be prepared to defend this position if questioned in an audit by showing the comparative costs.

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Ava Martinez

•2M

I'm dealing with a very similar situation right now! I have W-2 income with employer health insurance for myself, but my spouse is on a separate marketplace plan because adding them to my employer plan would cost way more than their individual coverage. I also have an LLC (elected S-Corp) from freelance work. From what I've researched, the key issue is whether your employer coverage "could have" covered your family members, regardless of cost. This is where it gets tricky - technically your employer offers family coverage, even though it's unreasonably expensive at $950/month. Some tax professionals argue that if the employer coverage is prohibitively expensive compared to marketplace alternatives, you can still claim the self-employed health insurance deduction. Others take a more conservative approach and say any availability of employer family coverage disqualifies you. I'd definitely recommend getting professional advice on this specific situation since the IRS guidance isn't crystal clear on what constitutes "reasonably available" employer coverage. The potential tax savings are significant, but you want to make sure you're on solid ground if questioned.

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Kara Yoshida

•24d

This is exactly the gray area I've been struggling with! I'm in almost the identical situation - W-2 job with expensive family coverage ($850/month) and a side S-Corp. I've been going back and forth on whether to take the deduction or not. What's really frustrating is that the IRS doesn't define what "reasonably available" means. Like, at what point does employer coverage become so expensive that it's not truly "available"? $500/month? $1000/month? There's no clear threshold. I'm leaning toward taking the deduction since the employer coverage costs 40% more than the marketplace plan, but I'm definitely keeping detailed documentation to justify the decision if needed. Has anyone here actually been audited on this specific issue and can share what the IRS's position was?

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