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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10163
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Where to deduct a rental real estate partners'(Form 8825)

Customer Question

where to deduct a rental real estate partners'(Form 8825) medical insurance premiums?
where does one enter real estate rental partners' (Form 8825) medical insurance payments
Submitted: 9 months ago.
Category: Tax
Customer: replied 9 months ago.
I've been waiting for a long time for my answer. Please advise or I need to cancel.
Expert:  Lane replied 9 months ago.

Good Morning - I'm guessing that your user of form 8825 and medical insurance payments together may be the reason no one is picking this up.

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Partnerships and S corporations use this form to report income and deductible expenses from rental real estate activities, including net income (loss) from rental real estate activities that flow through from partnerships, estates, or trusts.

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But the actual return for partnership is form 1065, and the S-Corp return is 1120-S

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As a self-employed person (where the tax is not paid at the partnership level but rather at the individual level, you'll take this deduction on line 29 in the Adjusted Gross Income section of the 1040 where it says "Self-employed health insurance deduction ."

Expert:  Lane replied 9 months ago.

I hope this has helped to clarify.

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Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)

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That's the only way I'll be credited for the work here.

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Thank you!

Lane

I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security & Medicare, estate, corporate & tax advice since 1986.

Customer: replied 9 months ago.
I am asking as to where to place medical insurance premiums paid for the partners on Form 1065. I don't think it belongs on page 1 because the 1065 will show a ordinary business loss for the amount of the insurance premiums. If I input the medical insurance premiums on Schedule K of the 1065 so these amounts are reflected in Line 4 of the K-1, where do I enter the expense - Form 8825? Which seems odd but may be correct. Or would it be best to show the medical insurance premiums as a distribution?
Expert:  Lane replied 9 months ago.

For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income.

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However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income.

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Otherwise, the insurance plan will not be considered to be established under your business.

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here's the IRS guidance on this:https://www.irs.gov/uac/Health-Insurance-Tax-Breaks-for-the-Self-Employed

Customer: replied 9 months ago.
I don't think you answered my questions. In preparing Form 1065, I needed to know where to enter medical insurance premiums paid on behalf of the partners. Form 1065 is a rental real estate and has only Form 8825. Do I enter medical insurance premiums on page 1 of the Form 1065 or on Schedule K of Form 1065 with the corresponding expense on Form 8825 or do I consider these medical insurance premiums as distributions. Form 1040 is not a part of my question - only Form 1065.
Expert:  Mark Anderson replied 9 months ago.

You enter the premiums on page 1 of the 1040:

Partners and LLC members
Partners and LLC members who are treated as partners for tax purposes are considered to be self-employed. If you fit into this category and directly pay your own health insurance premiums, you can claim the page 1 deduction. If the partnership or LLC pays the premiums, special tax reporting rules apply to the partnership’s or LLC’s return, but you can still claim the deduction for premiums paid for your coverage. In both instances, the deduction is subject to the month-by-month eligibility rule and the earned-income limitation.

Expert:  Mark Anderson replied 9 months ago.

Here is some information from the IRS:

https://www.irs.gov/publications/p535/ch06.html

For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

Expert:  Lane replied 9 months ago.

I'm so sorry but you don't seem to understand what I told you. .... This falls under the self employed health insurance deduction rules for self-employed (sole proprietors, LLC members, partners, and for THIS purpose, even S-Corp shareholders are treated as self-employed).

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The rules are that the income is taxed to the self-employed individual and then deducted on line 29

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The way that happens with a partnership is through guaranteed payments (those rules I showed you above ARE pasted in directly from IRS).

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My assumption was that you knew that guaranteed payments go on line 10 of the partnership return, as an expense of the partnership, "Guaranteed payments to partners ..."

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And that you knew that guaranteed payments go on the partner's K-1 on line 4, guaranteed payments.

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Sorry if I was not clear

Expert:  Lane replied 8 months ago.

I hope this has helped.

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Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)

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That's the only way I'll be credited for the work here.

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Thank you!

Lane

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