IRS Issues Proposed Rules On Compensation Deduction Limit for Health Services Pay

Under IRC Sec. 162(m)(6), which was enacted as part of the Affordable Care Act, a $500,000 compensation deduction limit is imposed on certain health insurance providers. The deduction limit applies to health insurance providers for payments made in a tax year beginning after December 31, 2012, that are applicable to services rendered by certain employees or other service providers (e.g., independent contractors). The IRS has issued proposed regulations on the application of the $500,000 deduction limit.

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