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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
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I have a single member LLC which had income of $1100 in 2012.

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I have a single member LLC which had income of $1100 in 2012. I had medical expenses of $3300 associated with the payment of insurance premiums. Are the insurance premiums deductible from my LLC income, or is it a deduction that is reported someplace else on my 1040? I do not pay myself a salary. Do I have to pay payroll taxes on the $1100? Can I contribute to my single member 401K plan? If so, how much? Is the deductibility of the $3300 in insurance premiums limited by the income of $1100 for the LLC?

tax-doctor :

hello, my name is XXXXX XXXXX I'll be happy to answer your questions

tax-doctor :

As a single member LLC you essentially for a schedule C where all of your business related income & exps are reported

tax-doctor :

as a self employee person the deductible portion of your ins premiums are factored in as an adjustment to your income on your 1040 not on schedule C

tax-doctor :

NO payroll per say, but any net income would be income earned and if you had a gain Social Security taxes would also be due if you had a gain only not a loss. By the way, if you had a loss that loss is deductible against any other income you may have had also on 1040

tax-doctor :

you may setup a 401k for the LLC

tax-doctor :

and yes, the 50% of insurance premiums is limited by your net schedule C, so prepare schedule C 1st and then go on to see what portion of your ins premiums may or may not be recorded in adjustments section

Customer:

I can see on my 1040 where my accountant deducted the self employment health insurance, but i am confused by the " 50% of insurance premiums is limited by your net schedule C". where is this located on the return?

It appears as your expert has gone offline for awhile.

A few answers...

You may contribute to your single member 401k up to the lesser of your total earned income for the year or $5k (6k if over 49). Your earned income from the LLC is the net income on Schedule C.

Your self employed health deduction cannot be more than the net income on Schedule C. The goes on line 29 of your Form 1040. Any amount you cannot deduct here because it is more than your net LLC income can be included as a medical expense on Schedule A.

Customer: replied 3 years ago.

i believe you are mistaken. the limitation of $5K or $6K is for an IRA not a 401K.
best,


al

Yes. The upper limit for 401k is $17,500 or $5500 more if over 18. I quoted the IRA limit.

Either way, your limit is the 1100 net income because that is lower.
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience: Over 20 Years experience
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