How to Receive a FULL Tax Deduction for Employer Health Insurance

Small business owners can receive a full deductible on their tax returns for health insurance premiums paid for employees or shareholders as opposed to having those premiums eliminated or limited as an itemized deduction. This can result in major income tax savings of up to 40% of premiums paid. However, it should be noted that the IRS rules and restrictions are stringent and small business owners must comply in order to receive a full deductible for premiums paid toward group health insurance. This article will outline some of the Do’s and Don’ts associated with the regulations imposed by the IRS that employers must adhere to in order to receive the maximum tax benefit.


  • Acquire Qualified Healthcare Coverage- Small business owners can verify that they are receiving qualified health insurance by obtaining insurance through a reputable agency or by visiting the healthcare marketplace at Small business owners can avoid penalties by ensuring that they and their employees or shareholders are covered under a qualified health insurer.
  • Report Premiums Paid on W-2 form- Small business owners must report healthcare related expenses paid on their W-2 forms when filing taxes in order to receive a full deductible. Small business owners must also ensure that they’ve been paying premiums toward group insurance in order to qualify for the full deductible as opposed to having the payments severely restricted as an itemized deduction.
  • Disclose All Pre-existing Ailments and Conditions to Insurer- Disclosing all pre-existing conditions could cause a spike in the cost of premiums, however, by being upfront with insurers, small business owners can avoid cancellation of coverage and avoid large unexpected costs that they may otherwise face later on.


  • Reimburse Employees for Individual Health Insurance Premiums Paid- The IRS views this practice as a means of small business owners circumventing employer health insurance regulations. Business owners must offer group insurance to their employees and if employees decline that group insurance, employers may not reimburse employees for individual health plans. Doing so can result in massive penalties, for business owners, enforced by the IRS.
  • Don’t Discriminate- Small business owners with less than 50 employees are not legally required to offer health insurance to their employees. However, if a small business owner does choose to offer health insurance to any of his/her employees, then he/she must offer the same coverage to all employees.

Business owners who follow these practices should be able to safely avoid any tax penalties that they may otherwise be subject to as constituted by the rules set forth from the IRS. Those business owners may also qualify to receive a full deductible from the IRS.

Easy Time Clock ™   is a cloud-based time and attendance system that provides a comprehensive, accurate, and affordable solution allowing employees to clock in and out with a computer, mobile device, or biometric reader.