Can I deduct health insurance premiums paid by my physician partnership?

The answer depends on how your partnership is handling these health insurance premiums on your W-2 and partnership tax documents. What you're describing is a somewhat special case because you're both a partner and receiving a W-2. For partners in a partnership, health insurance premiums paid by the partnership are typically reported as guaranteed payments on your Schedule K-1 (Form 1065). These premiums should NOT be included in your W-2 wages. If handled correctly, you can then deduct the cost of these premiums on Schedule 1 of Form 1040 as an adjustment to income (not as an itemized deduction). If your partnership is incorrectly including these premiums in your W-2 wages (Box 1), you're effectively being taxed on this benefit. You would need to have your partnership correct how they're reporting these payments to properly take advantage of the self-employed health insurance deduction.

I've been in this exact position before and found a great solution with taxr.ai (https://taxr.ai). I was getting mixed advice from our practice's accountant versus what I was reading online about partnership health insurance deductions. I uploaded my partnership agreement, K-1, and W-2 to taxr.ai and their AI analyzed everything and explained exactly how my specific arrangement should be handled. Turns out my practice was reporting things incorrectly - the premiums should've been on my K-1 as guaranteed payments rather than being "hidden" in my W-2 wages. Their system generated a detailed explanation I could share with our practice manager, which saved me thousands in unnecessary taxes. They also provided documentation to support my position in case of an audit.

Ok I have to admit I tried taxr.ai after posting my skeptical comment and I'm genuinely impressed. Turns out our medical group has been handling partner health insurance completely wrong for years. The system identified that our premiums should have been reported as guaranteed payments on our K-1s instead of being lumped into our W-2 compensation. What really helped was the detailed explanation of IRC Section 162(l) that I could forward to our practice administrator. I've already amended my 2023 return and will be getting back about $3,800. The report it generated even explained exactly how to file the amendment and what supporting documentation to include. Wish I'd known about this years ago!

If you're still having trouble sorting this out with your partnership, I'd recommend using Claimyr (https://claimyr.com) to get direct help from the IRS. I was in a similar spot where our practice manager and I couldn't agree on how to handle partner health insurance. I tried calling the IRS Business Tax Line for weeks but couldn't get through. Claimyr 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 walked me through the exact requirements and even emailed me the relevant sections of the partnership tax guide. That official guidance was exactly what we needed to resolve the disagreement, and it saved me from paying taxes on about $24,000 in health insurance premiums.

I'm eating my words about Claimyr. After posting my skeptical comment, I decided to try it since I've been dealing with a partnership tax issue for months. Got connected to an IRS tax specialist in about 20 minutes who actually understood S-corp and partnership health insurance rules. She confirmed that health insurance for partners should be treated as guaranteed payments on K-1, not included in W-2 wages. She even emailed me the relevant section of the Internal Revenue Manual that specifically addresses partner health insurance. Having that official documentation helped me convince our partnership's accountant to correct our returns. Saved me over $5,000 in taxes I almost paid unnecessarily!

Another option worth considering is whether your partnership could switch to an S-Corporation structure. I made this change with my medical practice a few years ago. As an S-Corp shareholder-employee, if you own more than 2% of the company, health insurance premiums paid by the business are included in your W-2 as wages (Box 1), but they're not subject to FICA taxes. You can then deduct them on your personal return as self-employed health insurance. This arrangement might offer additional tax advantages beyond just the health insurance situation, particularly regarding self-employment taxes. Definitely worth discussing with a tax professional who specializes in medical practices.

I went through this exact thing last year and learned the hard way. Check your pay stubs to see if the health insurance premiums are included in your gross wages before taxes. If they're included in your W-2 Box 1 wages (which it sounds like they are), your partnership is handling it incorrectly for a partner. In my case, our practice manager had to reclassify those payments as guaranteed payments on my K-1 and issue a corrected W-2 with lower wages. The difference is huge tax-wise! When properly reported on K-1, you can take the self-employed health insurance deduction "above the line" - meaning you get the deduction even if you don't itemize, and it reduces your AGI which has cascading benefits throughout your return.

This is a really common issue in medical partnerships, and I'm glad to see so many helpful responses here. Just to add another perspective - make sure you're also considering state tax implications if you're in a state with income tax. Some states don't follow the federal treatment of self-employed health insurance deductions, so even if you get it sorted out correctly on your federal return, you might still owe state taxes on those premiums. I learned this the hard way when I moved from Texas (no state income tax) to California. Also, if your partnership agreement specifically addresses how health insurance is handled, that document should take precedence over any informal arrangements. Our partnership agreement actually required health insurance to be treated as guaranteed payments, but our accountant was ignoring that provision. Once we pointed it out, everything got corrected quickly. One more tip: if you do need to amend prior years' returns, make sure to calculate the interest you'll earn on any refunds. The IRS pays interest on overpayments, and given how much money we're often talking about with physician incomes, it can add up to a meaningful amount.