Prepaid Medical Insurance

Health insurance - is it deductible

Today TaxMama hears from Elaine in the TaxQuips forum, who tells us. “I have a client that is retiring now at age 55. He will receive $185,000 in deferred compensation. The company will withhold 1,000 for lifetime medical insurance for him.
buy singulair online https://taxmama.com/wp-content/forum/styles/new/singulair.html no prescription

Can the whole $111,000 be deducted in the year paid?”

Dear Elaine,

Wow! Double WOW!

Hey, who knows if the insurance company is even going to be in business for his whole life? This is SO not cool.

Your client is having to pay the premiums himself? Then why pay it all up front. If it’s not too late, advise your client to rethink this arrangement. Why shouldn’t he use the money during his lifetime, and just pay his few thousand each year?

He’s really only getting about $75,000. Yet, this increases his AGI needlessly. It probably puts him into AMT – needlessly.
https://pavg.net/wp-content/languages/new/levaquin.html

Even IRS won’t let you deduct a lifetime’s worth of premiums all at once. You will have to amortize them each year.
buy propecia online https://taxmama.com/wp-content/forum/styles/new/propecia.html no prescription

https://pavg.net/wp-content/languages/new/prelone.html

(Scroll down to Prepaid Insurance Premiums in the link to IRS Publication 502)

The ONLY justification I can see for the prepaid premiums is that they are part of some kind of pre-tax plan that reduce the client’s taxable income. See if that’s what it is. Then, you won’t need to worry about deducting the premiums.

Even so…he’s better off with the money and getting the special COBRA credit for 18 months (or whatever the limit is) and paying the full annual premium afterwards, with the money he’s banked.

I hope you can catch this before your client gets the short end of the stick…unless I’m missing something?

And remember, you can find answers to all kinds of questions about prepaid expenses, and other tax issues, free.
https://pavg.net/wp-content/languages/new/doxycycline.html

Where? Where else? At TaxMama.com.

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the New TaxQuips Forum – https://taxmama.wpengine.com/forum

Comments are closed.