What this line means
The cost of benefit programs you provide to your employees (not yourself). This includes your contributions to employee accident and health plans, group-term life insurance, dependent care assistance programs, and other fringe benefits. If you have no employees, this line is zero. Your own health insurance as a sole proprietor is deducted on Form 1040, not here.
Does this apply to you?
- You provide health insurance to employees and pay part or all of the premiums
- You offer group-term life insurance to employees
- You contribute to a dependent care assistance program for employees
- You provide other taxable or nontaxable fringe benefits to employees
Easy to overlook
Your own health insurance does not go here As a sole proprietor, your personal health insurance premiums are deductible — but on Schedule 1 of Form 1040 (line 17), not on Schedule C line 14. Putting your own premiums on line 14 reduces self-employment income and self-employment tax, which the IRS considers improper. It also does not affect your AGI the way the Schedule 1 deduction does. 1 General filing pattern — self-employed health insurance misplacement
Benefits for your spouse-employee are deductible here If your spouse is a legitimate employee of your business — W-2, regular duties, reasonable pay — the cost of their health insurance is a deductible business expense on line 14. This is a significant planning opportunity because it lets you deduct family health insurance as a business expense rather than as the more limited self-employed health insurance deduction. 2 IRS Schedule C instructions — Line 14
Watch out for this
Deducting your own health insurance premiums on Schedule C instead of Schedule 1 of Form 1040. The self-employed health insurance deduction reduces your income tax but does not reduce your self-employment tax. Placing it on Schedule C improperly reduces both, which the IRS flags.
Footnotes
-
IRS Schedule C (Form 1040) Instructions. See also IRS Publication 17, Your Federal Income Tax. https://www.irs.gov/pub/irs-pdf/p17.pdf ↩
-
IRS Schedule C (Form 1040) Instructions, Line 14. https://www.irs.gov/instructions/i1040sc ↩