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Hr block online 1. Hr block online   Organizations Subject to the Tax Table of Contents The tax on unrelated business income applies to most organizations exempt from tax under section 501(a). Hr block online These organizations include charitable, religious, scientific, and other organizations described in section 501(c), as well as employees' trusts forming part of pension, profit-sharing, and stock bonus plans described in section 401(a). Hr block online In addition, the following are subject to the tax on unrelated business income. Hr block online Individual retirement arrangements (IRAs), including traditional IRAs, Roth IRAs, Coverdell IRAs, simplified employee pensions (SEP-IRAs), and savings incentive match plans for employees (SIMPLE IRAs). Hr block online State and municipal colleges and universities. Hr block online Qualified state tuition programs. Hr block online Medical savings accounts (MSAs) described in section 220(d). Hr block online Coverdell savings accounts described in section 530. Hr block online U. Hr block online S. Hr block online instrumentalities. Hr block online   A corporation that is a U. Hr block online S. Hr block online instrumentality described in section 501(c)(1) is not subject to the tax on unrelated business income if the corporation is organized under an Act of Congress and, under the Act, is exempt from federal income taxes. Hr block online Colleges and universities. Hr block online   Colleges and universities that are agencies or instrumentalities of any government or any political subdivision of a government, or that are owned or operated by a government or political subdivision of a government, are subject to the tax on unrelated business income. Hr block online As used here, the word government includes any foreign government (to the extent not contrary to a treaty) and all domestic governments (the United States and any of its possessions, any state, and the District of Columbia). Hr block online   The tax is on the unrelated business income of both the universities and colleges themselves and on their wholly owned tax exempt subsidiary organizations. Hr block online It is immaterial whether the business is conducted by the university or by a separately incorporated wholly owned subsidiary. Hr block online If the business activity is unrelated, the income in both instances will be subject to the tax. Hr block online If the primary purpose of a wholly owned subsidiary is to operate or conduct any unrelated trade or business (other than holding title to property and collecting income from it), the subsidiary is not an exempt organization, and this rule does not apply. Hr block online Title-holding corporations. Hr block online   When an exempt title-holding corporation, described in section 501(c)(2), pays any of its net income to an organization that itself is exempt from tax under section 501(a) (or would pay such an amount except that the expenses of collecting its income exceed the amount collected) and files a consolidated return with that organization, the title-holding corporation is treated, for unrelated business income tax purposes, as organized and operated for the same purposes as the exempt payee organization. Hr block online   Thus, a title-holding corporation whose source of income is related to the exempt purposes of the payee organization is not subject to the unrelated business income tax if the holding corporation and the payee organization file a consolidated return. Hr block online However, if the source of the income is not so related, the title-holding corporation is subject to unrelated business income tax. Hr block online Example. Hr block online X, a title-holding corporation, is required to distribute its net income to A, an exempt organization. Hr block online During the tax year, X realizes net income of $900,000 from source M, which is related to A's exempt function. Hr block online X also receives $100,000 from source N, which is not related to A's exempt function. Hr block online X and A file a consolidated return for the tax year. Hr block online X has unrelated business income of $100,000. Hr block online Prev  Up  Next   Home   More Online Publications
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Hr block online 6. Hr block online   Insurance Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible PremiumsSelf-Employed Health Insurance Deduction Nondeductible Premiums Capitalized Premiums When To Deduct Premiums What's New Retiree drug subsidy. Hr block online  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). Hr block online For more information, see the retiree drug subsidy frequently asked questions on IRS. Hr block online gov. Hr block online Introduction You generally can deduct the ordinary and necessary cost of insurance as a business expense if it is for your trade, business, or profession. Hr block online However, you may have to capitalize certain insurance costs under the uniform capitalization rules. Hr block online For more information, see Capitalized Premiums , later. Hr block online Topics - This chapter discusses: Deductible premiums Nondeductible premiums Capitalized premiums When to deduct premiums Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 538 Accounting Periods and Methods 547 Casualties, Disasters, and Thefts Form (and Instructions) 1040 U. Hr block online S. Hr block online Individual Income Tax Return See chapter 12 for information about getting publications and forms. Hr block online Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. Hr block online Insurance that covers fire, storm, theft, accident, or similar losses. Hr block online Credit insurance that covers losses from business bad debts. Hr block online Group hospitalization and medical insurance for employees, including long-term care insurance. Hr block online If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. Hr block online If an S corporation pays accident and health insurance premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages subject to federal income tax withholding. Hr block online See Publication 15-B. Hr block online Liability insurance. Hr block online Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Hr block online Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Hr block online If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. Hr block online If an S corporation pays workers' compensation premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages. Hr block online Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Hr block online Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Hr block online Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Hr block online If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Hr block online If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Hr block online Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. Hr block online Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Hr block online Self-Employed Health Insurance Deduction You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. Hr block online The insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Hr block online A child includes your son, daughter, stepchild, adopted child, or foster child. Hr block online A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Hr block online One of the following statements must be true. Hr block online You were self-employed and had a net profit for the year reported on Schedule C (Form 1040), Profit or Loss From Business; Schedule C-EZ (Form 1040), Net Profit From Business; or Schedule F (Form 1040), Profit or Loss From Farming. Hr block online You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Hr block online , box 14, code A. Hr block online You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. Hr block online You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Hr block online Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. Hr block online The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. Hr block online For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual. Hr block online For partners, a policy can be either in the name of the partnership or in the name of the partner. Hr block online 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. Hr block online 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. Hr block online Otherwise, the insurance plan will not be considered to be established under your business. Hr block online For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. Hr block online You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. Hr block online However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Hr block online Otherwise, the insurance plan will not be considered to be established under your business. Hr block online Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Hr block online If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. Hr block online For more information, see Form 1040X, Amended U. Hr block online S. Hr block online Individual Income Tax Return. Hr block online Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. Hr block online Take the deduction on Form 1040, line 29. Hr block online Qualified long-term care insurance. Hr block online   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. Hr block online But, for each person covered, you can include only the smaller of the following amounts. Hr block online The amount paid for that person. Hr block online The amount shown below. Hr block online Use the person's age at the end of the tax year. Hr block online Age 40 or younger–$360 Age 41 to 50–$680 Age 51 to 60–$1,360 Age 61 to 70–$3,640 Age 71 or older–$4,550 Qualified long-term care insurance contract. Hr block online   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. Hr block online The contract must meet all the following requirements. Hr block online It must be guaranteed renewable. Hr block online It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits. Hr block online It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. Hr block online It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Hr block online Qualified long-term care services. Hr block online   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. Hr block online The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. Hr block online Worksheet 6-A. Hr block online Self-Employed Health Insurance Deduction Worksheet Note. Hr block online Use a separate worksheet for each trade or business under which an insurance plan is established. Hr block online 1. Hr block online Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. Hr block online Your insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Hr block online But do not include the following. Hr block online   Amounts for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Hr block online Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. Hr block online Any amounts you included on Form 8885, line 4. Hr block online Any qualified health insurance premiums you paid to “U. Hr block online S. Hr block online Treasury-HCTC. Hr block online ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Hr block online Any payments for qualified long-term care insurance (see line 2) 1. Hr block online   2. Hr block online For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. Hr block online       a) Total payments made for that person during the year. Hr block online       b) The amount shown below. Hr block online Use the person's age at the end of the tax year. Hr block online         $360— if that person is age 40 or younger          $680— if age 41 to 50         $1,360— if age 51 to 60         $3,640— if age 61 to 70         $4,550— if age 71 or older         Do not include payments for any month you were eligible to participate in a long-term care insurance plan subsidized by your or your spouse’s employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Hr block online If more than one person is covered, figure separately the amount to enter for each person. Hr block online Then enter the total of those amounts 2. Hr block online   3. Hr block online Add lines 1 and 2 3. Hr block online   4. Hr block online Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. Hr block online Do not include Conservation Reserve Program payments exempt from self-employment tax. Hr block online If the business is an S corporation, skip to line 11 4. Hr block online   5. Hr block online Enter the total of all net profits* from: Schedule C (Form 1040), line 31; Schedule C-EZ (Form 1040), line 3; Schedule F (Form 1040), line 34; or Schedule K-1 (Form 1065), box 14, code A; plus any other income allocable to the profitable businesses. Hr block online Do not include Conservation Reserve Program payments exempt from self-employment tax. Hr block online See the Instructions for Schedule SE (Form 1040). Hr block online Do not include any net losses shown on these schedules. Hr block online 5. Hr block online   6. Hr block online Divide line 4 by line 5 6. Hr block online   7. Hr block online Multiply Form 1040, line 27, by the percentage on line 6 7. Hr block online   8. Hr block online Subtract line 7 from line 4 8. Hr block online   9. Hr block online Enter the amount, if any, from Form 1040, line 28, attributable to the same trade or business in which the insurance plan is established 9. Hr block online   10. Hr block online Subtract line 9 from line 8 10. Hr block online   11. Hr block online Enter your Medicare wages (Form W-2, box 5) from an S corporation in which you are a more-than-2% shareholder and in which the insurance plan is established 11. Hr block online   12. Hr block online Enter any amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or any amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above 12. Hr block online   13. Hr block online Subtract line 12 from line 10 or 11, whichever applies 13. Hr block online   14. Hr block online Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Hr block online Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). Hr block online 14. Hr block online   * If you used either optional method to figure your net earnings from self-employment from any business, do not enter your net profit from the business. Hr block online Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. Hr block online * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. Hr block online However, it does not include capital gain income. Hr block online Chronically ill individual. Hr block online   A chronically ill individual is a person who has been certified as one of the following. Hr block online An individual who has been unable, due to loss of functional capacity for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual. Hr block online Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. Hr block online An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Hr block online The certification must have been made by a licensed health care practitioner within the previous 12 months. Hr block online Benefits received. Hr block online   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. Hr block online Other coverage. Hr block online   You cannot take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you did not actually participate. Hr block online In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2013, do not use amounts paid for coverage for that month to figure the deduction. Hr block online   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. Hr block online However, any medical insurance payments not deductible on Form 1040, line 29, can be included as medical expenses on Schedule A (Form 1040), Itemized Deductions, if you itemize deductions. Hr block online Effect on itemized deductions. Hr block online   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. Hr block online Effect on self-employment tax. Hr block online   For tax years beginning before or after 2010, you cannot subtract the self-employed health insurance deduction when figuring net earnings for your self-employment tax from the business under which the insurance plan is established, or considered to be established as discussed earlier. Hr block online For more information, see Schedule SE (Form 1040). Hr block online How to figure the deduction. Hr block online   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Hr block online However, if any of the following apply, you must use Worksheet 6-A in this chapter. Hr block online You had more than one source of income subject to self-employment tax. Hr block online You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Hr block online You are using amounts paid for qualified long-term care insurance to figure the deduction. Hr block online If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. Hr block online Health coverage tax credit. Hr block online   You may be able to take this credit only if you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment trade adjustment assistance (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient. Hr block online Use Form 8885 to figure the amount, if any, of this credit. Hr block online   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. Hr block online Any amounts you included on Form 8885, line 4. Hr block online Any qualified health insurance premiums you paid to “U. Hr block online S. Hr block online Treasury-HCTC. Hr block online ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Hr block online More than one health plan and business. Hr block online   If you have more than one health plan during the year and each plan is established under a different business, you must use separate worksheets (Worksheet 6-A) to figure each plan's net earnings limit. Hr block online Include the premium you paid under each plan on line 1 or line 2 of that separate worksheet and your net profit (or wages) from that business on line 4 (or line 11). Hr block online For a plan that provides long-term care insurance, the total of the amounts entered for each person on line 2 of all worksheets cannot be more than the appropriate limit shown on line 2 for that person. Hr block online Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. Hr block online Self-insurance reserve funds. Hr block online You cannot deduct amounts credited to a reserve set up for self-insurance. Hr block online This applies even if you cannot get business insurance coverage for certain business risks. Hr block online However, your actual losses may be deductible. Hr block online See Publication 547. Hr block online Loss of earnings. Hr block online You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. Hr block online However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. Hr block online Certain life insurance and annuities. Hr block online For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Hr block online You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Hr block online A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Hr block online For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Hr block online The disallowance applies without regard to whom the policy covers. Hr block online Partners. Hr block online If, as a partner in a partnership, you take out an insurance policy on your own life and name your partners as beneficiaries to induce them to retain their investments in the partnership, you are considered a beneficiary. Hr block online You cannot deduct the insurance premiums. Hr block online Insurance to secure a loan. Hr block online If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Hr block online Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Hr block online In the event of death, the proceeds of the policy are generally not taxed as income even if they are used to liquidate the debt. Hr block online Capitalized Premiums Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Hr block online Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Hr block online You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Hr block online Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. Hr block online Uniform capitalization rules. Hr block online   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Hr block online Produce real property or tangible personal property. Hr block online For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Hr block online Acquire property for resale. Hr block online However, these rules do not apply to the following property. Hr block online Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Hr block online Property you produce if you meet either of the following conditions. Hr block online Your indirect costs of producing the property are $200,000 or less. Hr block online You use the cash method of accounting and do not account for inventories. Hr block online More information. Hr block online   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Hr block online When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. Hr block online Cash method. Hr block online   If you use the cash method of accounting, you generally deduct insurance premiums in the tax year you actually paid them, even if you incurred them in an earlier year. Hr block online However, see Prepayment , later. Hr block online Accrual method. Hr block online   If you use an accrual method of accounting, you cannot deduct insurance premiums before the tax year in which you incur a liability for them. Hr block online In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). Hr block online For more information about the accrual method of accounting, see chapter 1. Hr block online For information about the exception for recurring items, see Publication 538. Hr block online Prepayment. Hr block online   You cannot deduct expenses in advance, even if you pay them in advance. Hr block online This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Hr block online   Expenses such as insurance are generally allocable to a period of time. Hr block online You can deduct insurance expenses for the year to which they are allocable. Hr block online Example. Hr block online In 2013, you signed a 3-year insurance contract. Hr block online Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Hr block online You can deduct in 2014 and 2015 the premium allocable to those years. Hr block online Dividends received. Hr block online   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. Hr block online For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. Hr block online Prev  Up  Next   Home   More Online Publications