March is here, and tax season is in full swing. Is your business ready for the upcoming income tax deadline? More importantly, are you claiming all the deductions you’re entitled to?
Let’s tackle some common questions about employee benefits, health insurance, and what’s tax-deductible for your state and federal filings. You don’t want to leave money on the table!
Health Insurance and Tax FAQs
When Are Taxes Due?
That depends on your business structure and whether you operate on a calendar year or fiscal year.
The Internal Revenue Service says a sole proprietor’s individual tax return and related tax forms (Schedule C, Profit or Loss form, etc.) are due on the 15th day of the fourth month following the end of the tax year. For calendar year taxpayers, that means April 15.
Partnership and S Corporation tax returns are generally due on the 15th day of the third month (March 15) following the end of the tax year. Refer to the instructions for IRS Form 1065 for details. S corporation filers should use the instructions for IRS Form 1120-S, U.S. Income Tax Return for an S Corporation.
Corporations that are not an S Corporation may use either a calendar year or fiscal tax year. Tax returns are generally due by the 15th day of the fourth month following the end of the organization’s tax year (April 15th for most) However, if a corporation has a fiscal tax year ending June 30, it must file by the 15th day of the third month after the tax year. The 15th of the third month after June 30 would be September. Refer to instructions for IRS Form 1120 for more about due dates and exceptions to due dates.
Keep in mind, if a due date falls on a Saturday, Sunday, or legal holiday, the date is extended to the next business day.
What Deductions Are Available?
Talk to your accountant or tax advisor about your deduction options — it could save your business money. Every business is unique, so working with a tax professional helps ensure you’re claiming the right deductions and not missing out on any opportunities your business might qualify for. Here’s a list of commonly asked questions.
- Can I deduct costs for employees’ health insurance? Current law (as of Q1 2025) allows most businesses to deduct the premiums paid for employees’ health insurance.
- Can I deduct premiums for dependents’ health insurance? If you offer dependent health insurance to your workers and you make a contribution to the costs for this coverage, you are permitted to deduct the costs for dependents’ health insurance.
- Can I deduct other insurance costs? You may be able to deduct the costs of life insurance for officers and employees if you are not a beneficiary of such coverage. Your deductions apply to both federal income and payroll taxes.
- What if I am a partner in my business? If you are a partner in a business partnership, part of a Limited Liability Company (LLC), or a shareholder with two percent or more of stock in an S corporation, deductions are a little more complicated. You should consult with a tax advisor concerning the potential deductibility on your federal and state income taxes.
- Can my employees deduct what they pay for health insurance? For employees, contributions they make toward the cost of their health coverage are not directly deductible on their personal tax returns. However, those amounts can be deducted from their income on a pre-tax basis if you offer a Section 125/Premium Only Plan (POP). That increases employees take-home pay and reduces their taxable income.
- What about HRA and HSA QSEHRA contributions? Your business can deduct contributions and reimbursements to employees for a Health Reimbursement Arrangement (HRA) and contributions to your employees’ Health Savings Accounts (HSAs).
- I’ve heard of an ACA Tax Credit as part of the ACA. Does that apply to my business? Over and above standard tax deductions, small businesses may qualify for a health insurance tax credit as part of the Affordable Care Act (ACA). It depends on your group size, contribution toward employee premiums, and how and where you purchase your coverage.The highest tax credit is offered to companies with fewer than 10 employees who are paid an average of $27,000 or less. More information on the Small Business Health Care Tax Credit is available at HealthCare.gov.
Other Possible Deductions
Even small businesses that are unable to sponsor a group health plan may be able to take advantage of other tax benefits. For example, under federal law, some qualifying businesses may fund special health care reimbursement accounts. These can be used to fund the private purchase of individual or family health insurance plans by employees.
Employers with fewer than 50 employees can offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). A QSEHRA allows small businesses to provide non-taxed reimbursement of certain health care expenses, such as health insurance premiums and coinsurance amounts. More information is available on QSEHRAs on the HealthCare.gov website.
Offering health insurance not only provides tax benefits but also lowers your payroll taxes. It’s also a great way to attract and keep your best employees.
Your business might qualify for extra deductions on various expenses, including::
- inventory
- office furniture
- office supplies
- business entertainment
- travel
- interest on loans
- bad debts
- employee gifts
- contract labor
- legal fees
Talk to a tax professional to learn about potential deductions for your business. You may also want to check out Small Business Taxes: What to Expect in 2025, by Business News Daily.
