When starting a new business in Idaho (Idaho S-Corporation or Idaho C-Corporation), something you need to take into account is the Idaho Fringe benefits rules/laws and how to use them to your benefit.
Idaho Fringe Benefits
Health insurance premiums paid by the corporation can be received tax-free by the owners of an Idaho C corporation. A corporation can fully deduct these premiums. Idaho S corporation owners must report these benefits as income and then deduct the premiums from gross income on their individual income tax return, resulting in a “wash” for income tax purposes. While the Idaho S corporation will receive a full deduction for these premiums, the net deduction passed through to the shareholders will likely be less than their share of premiums unless there is a single owner or equal owners with the exact same cost of insurance.
Long Term Idaho Care and Disability Insurance
An Idaho C corporation can fully deduct long-term-care and disability insurance premiums without any additional income reported to the owners. Idaho S corporation owners would have to pick up these benefits as gross income for the S corporation to fully deduct these premiums.
Medical Reimbursement Plan
Where most owners of an Idaho C corporation are also employees, a medical reimbursement plan under Sec. 105(b) allows the C corporation to cover all medical expenses not paid for by the insurance plan. As long as the plan is nondiscriminatory, the reimbursements are not taxable to the employees. However, to avoid penalties under the Idaho Patient Protection and Affordable Care Act, P.L. 111-148, beginning in 2014, a medical reimbursement plan generally must be integrated with a group health plan such as:
- health insurance premium
- long-term-care and disability insurance premiums
- medical reimbursement plan
If you are a business in CDA, Rathdrum, Post Falls, Hayden, Athol or Sandpoint Idaho then give CDA Accounting a call to help.