Welcome Guest! You aren't signed in. Sign In

My Q&A All Q&A
Go

Jallio

TaxAlmanac

0 watching

Is AFLAC and disability Insurance deductible?

See original discussion at http://www.taxalmanac.org/index.php/Discussion:Is_AFLAC_and_disability_Insurance_deductible%3F


If you are self employed sole propriator can you deduct AFLAC (accident and cancer insurnace) and disability policies on the 1040 as self employed health insurnace premiums?

( Asked 04/10/07 06:25 PM in TaxAlmanacViews by community 76 )

Answers (13)  Comments (1)  

Blrgcpa

TaxAlmanac

No. they are not health ins policies. However they can be deducted under insurance.

( Answered 04/10/07 06:42 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Jallio

TaxAlmanac

Even the owner himself can deduct his policy under insurance for the company? Thanks for your reply.

( Answered 04/10/07 06:54 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Kevinh5

TaxAlmanac

If it is disability insurance, it would be absolutely idiotic to deduct them. The benefits would be taxable instead of tax free. If it is medical insurance, it is deductible as SE HI.

( Answered 04/10/07 07:25 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Jallio

TaxAlmanac

You have got me confused. My question is I have a client who is a sole propriator taking draws form his company as salary and he also had an AFLAC policy. Is it legal to deduct his AFLAC policy as insurnace expence on schedule C for his own policy. It is not health insurnace so I am leaning toward he can not deduct them. WHat are your thoughts?

( Answered 04/10/07 07:27 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Laticiaw

TaxAlmanac

If you deduct, then you get to pay taxes...I think...wait a minute -- most of my AFLAC is pretax and is not subject to income taxes if I draw on it (accident insurance) but I think that you need to deduct it as self employed health insurance...

( Answered 04/10/07 08:04 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Kevinh5

TaxAlmanac

can't deduct on Sch C for the owner, only for employees.

( Answered 04/10/07 08:07 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Jallio

TaxAlmanac

So basically the owner can not deduct it on himself ANYWHere on his return? I tis not pretax for him since he does not get a paycheck only draws.

( Answered 04/10/07 08:10 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Riley2

TaxAlmanac

Deducting or not deducting disability insurance premiums would have no bearing on the taxability of the benefits.

Disability insurance premiums are only deductible as a business expense when provided as a fringe benefit to an employee. Your client is not an employee; consquently, he may not deduct disability premiums.

The only time a disability benefit would be taxable is when the recipient's employer paid the premiums or paid the benefits directly.

( Answered 04/10/07 09:44 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

I agree with Riley! Sounds well thought out.

( Commented 04/11/07 12:49 AM in TaxAlmanac ,Views by community 76)

TAChase

TaxAlmanac

So, Riley2, if the AFLAC premiums are paid by the S Corp on behalf of the > than 2% owners, then they are not deductible. Also, since the premiums are paid for by the S Corporation on behalf of the owners, the payout, if and when there is one, would be taxable to the recipient, right? Just want to be sure that I understood correctly.

( Answered 04/12/07 11:03 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Waynecpa

TaxAlmanac

Normally the recipient would receive a W-2 showing third-party sick pay as taxable income. I'm kind of wondering what to do when someone continues to receive disability benefits over two years and receives a W-2 showing taxable income the first year and nothing the second. Still taxable?

( Answered 04/13/07 12:50 AM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Riley2

TaxAlmanac

Chase, if the employer pays the premiums and the employee includes the premium cost in gross income (as in the case of more than 2% shareholder), the employee will not include the disability benefit in gross income when he becomes disabled. The disability premium paid by the S corporation on behalf of a more than 2% owner is deductible as a salary or wage.

( Answered 04/13/07 03:47 AM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

TAChase

TaxAlmanac

Thank you for this clarification. I think I misunderstood originally. These S Corp owners are not handling the the health and disability insurance properly from an accounting perspective, i.e. not added to their wages per the W-2, but if I include these insurance premiums on the S Corp as officer wages, rather than other expenses, then add these same premiums to their wages on the 1040, and deduct it as an adjustment to income on the 1040, given that that there is S Corp income, I should be OK, right? Wrong?

( Answered 04/13/07 05:23 AM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Karen258

TaxAlmanac

My Sch C client paid the disability premiums for her employees and did not include them on employee's W2s. If she doesn't deduct the premiums on her Sch C would this still be considered "after tax dollars" for all the employees since she didn't take the deduction?

( Answered 03/31/08 07:14 PM in TaxAlmanac ,Views by community 76 )

Rating (0):
This helped! Not too helpful.
 

Know the answer?

Submit An Answer

Just want to comment?

Add A Comment

Have a new question?

Ask The Community