Do health insurance premiums reduce an LLC member's capital account?


3

If the LLC covers the health insurance premiums for the members, does the amount get deducted from the member's capital account?

LLC Insurance Benefits

asked Apr 22 '12 at 04:11
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Alex Pereda
16 points
  • It's a business expense that doesn't create an asset. – Dnbrv 7 years ago

1 Answer


1

See http://www.irs.gov/publications/p535/ch06.html : "If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners." Since LLCs are taxed as partnerships, that should still apply.

So, that means that the insurance premiums are included in the calculation of profit/loss which is used determine the change to each member's capital account.

But, note the word "generally" above. Partnership taxation is tricky. Best to ask an accountant for your situation.

answered Apr 22 '12 at 04:50
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Chris Fulmer
2,849 points
  • thank you for the reply. At some point they were entered as guaranteed payments on the k1. Then it was changed, can't recall how they file them. But the net effect is the same, they get deducted from the capital account, which leads to another question, can the capital account be negative? – Alex Pereda 7 years ago

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LLC Insurance Benefits