C-Corporations
Business Deductibility of Employer-Paid Premiums
On Behalf of an Employee
A C-Corporation that purchases Tax-Qualified
Long-Term Care Insurance on behalf of an Employee may deduct
the premiums paid as an ordinary business expense. This holds true for Tax-Qualified Long-Term Care Insurance purchased
for the Employee's spouse or other tax dependent.
On Behalf of an Employee Stockholder
A C-Corporation that purchases Tax-Qualified
Long-Term Care Insurance on behalf of an Employee Stockholder
may deduct the premiums paid as an ordinary business expense. This holds true
for Tax-Qualified Long-Term Care
Insurance purchased for the Employee Stockholder's spouse or
other tax dependent.
On Behalf of a Stockholder (Owner) Who is not an Employee
A C-Corporation that purchases Tax-Qualified
Long-Term Care Insurance for a shareholder who is not an
employee does not receive a deduction for the premiums paid.
Tax Consequences of C-Corp-Paid Premiums
For an Employee
Employer-paid Long-Term Care Insurance
premiums would not be included in the Employee's gross income (IRC
Sec. 106). This would also apply to premiums paid on behalf of the employee's
spouse and other tax dependents.
For an Employee Stockholder
Provided that the Stockholder is also a bona fide Employee of the
C-Corporation, Tax-Qualified Long-Term
Care Insurance premiums paid by the C-Corporation on behalf of
the Employee are fully deductible assuming the C-Corporation retains no
interest in the policy. This would also apply to premiums paid on behalf of the
employee's spouse and other tax dependents.
For a Stockholder who is not an Employee
Tax-Qualified Long-Term Care Insurance
premiums paid by a C-Corporation on behalf of a Stockholder who is not
an Employee of the C-Corporation would represent dividend income for the
Stockholder.
We do not provide tax or legal advice. Any decisions whether to implement these ideas should be made by the client in consultation with professional financial, tax, and legal counsel.