Arizona Life and Health Practice Exam

How are health insurance premiums paid by each partner in a partnership treated for tax purposes?

1. 50% Tax deductible

2. 75% Tax deductible

3. 100% Tax deductible

4. Not Tax deductible

The correct answer is: 100% Tax deductible

In a partnership, health insurance premiums paid for partners can be deducted as a business expense. For tax purposes, if a partnership pays the premiums, these costs are generally considered a deductible expense. This means that 100% of the health insurance premiums paid for the partners can typically be written off by the partnership, provided that the partners meet certain criteria related to having self-employment income. This deduction is available as long as the health insurance premiums are not paid through a salary, and the partners must report this amount as income on their individual tax returns. However, they can also deduct the premiums from their taxable income, effectively allowing them to benefit from the full deduction. Thus, choosing the option that indicates 100% of these premiums are tax-deductible accurately reflects the tax treatment under current law related to health insurance premiums paid by partnerships.