Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 09-20-2013, 09:21 PM
Junior Member
 
Join Date: Sep 2013
Posts: 1
Real estate LLC and Health Premiums?

Hi -
We have an llc (2 member, my wife and I) set up to hold our real estate asset (condo). It has been a year, now. First year we did some rehab but this year we will accrue some cash and next year even better. In other words, starting to make a little money. This is in California, if it matters (I assume not).

Our question is about health insurance premiums. We'd like to deduct this expense or whatever we can and are not sure how to properly do so or what amount we can do this. For example, if we clear 1000 a month and our combined premiums are 500, we assume we do NOT expense this as a normal business expense, but rather against our personal profit at the end of the year? Or how does this work? What is the effective actual benefit we will receive, just so that I understand it?

THANK YOU folks, we have to make some decisions on which plan, etc, ASAP and our accountant is not available right away though I assume he will have a chance to look this over - I just need to understand the principal and such.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 09-21-2013, 05:38 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,233
Quote:
Originally Posted by couchsurf View Post
Hi -


#1;We have an llc (2 member, my wife and I) set up to hold our real estate asset (condo). It has been a year, now. First year we did some rehab but this year we will accrue some cash and next year even better. In other words, starting to make a little money. This is in California, if it matters (I assume not).



#2;Our question is about health insurance premiums. We'd like to deduct this expense or whatever we can and are not sure how to properly do so or what amount we can do this. For example, if we clear 1000 a month and our combined premiums are 500, we assume we do NOT expense this as a normal business expense, but rather against our personal profit at the end of the year? Or how does this work? What is the effective actual benefit we will receive, just so that I understand it?
#1;In general, The IRS does allow a husband and wife who are co-owners of a business to make an election to be qualified as a joint venture, where each spouse reports business income on a Sch C rather than on a partnership Form 1065. But IRS regulations specifically prohibit spouses who are co-owners of an LLC from making that election. However, Joint ventures for the purpose of this act cannot be in the name of a state law entity, and an LLC is formed under state law. When a married couple co-own an LLC, the IRS by default treats the company as a partnership and requires the spouses to report their share of income on Form 1065. The other option the married couple have would be to elect to have their LLC treated as a C or S corp, under which one or both spouses can receive a wage from the LLC for actively participating in the business.




#2;The actual deduction occurs at the partnership level and is passed to the partner via lower income on the Sch K-1.
If the partnership pays for the health insurance premiums for its partners, it deducts the expense as guaranteed payments and reports the amount to each partner on their respective Sch K-1s as guaranteed payments. The partner then picks up the guaranteed payment as income and reports “self employed health insurance” deduction. The guaranteed payment offsets the self employed health insurance deduction for a net zero effect on taxable income, thus the single deduction described above on the K-1.When a partner pays his (her) own medical insurance premiums, the self-employed medical insurance deduction is allowed if there is self-employment income. In prior years, this topic wasn’t such a big deal… until now. The IRS is cracking down on “double-dipping” of health insurance deductions by partners and S Corporation shareholders. IRS found that frequently the entity deducted the premiums then the owners deducted them on their personal return. This frequently happened when the person preparing the personal return did not prepare the business entity’s tax return. They actually changed the rules in 2008, but implementation has been slow.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
C corp paying for health ins premiums janes3563 C-Corporation 4 12-16-2014 10:24 PM
S-corp health ins premiums paid tfridley Income 1 03-12-2011 05:11 AM
Is the Real Estate Withholding Tax an additional tax on sale of Oregon Real Property? TaxGuru Oregon 0 11-04-2010 12:03 PM
Real estate professional offsetting Real Este losses against spouse's W-2 income MRAMANNA Rental Real-Estate 2 03-08-2009 01:49 PM
health insurance premiums for employees maverick Limited Liability Company 0 01-15-2008 01:34 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning