The partnership pays health insurance premiums on behalf of the partners. How is this handled? Because this is a benefit to the partners, the partnership may not deduct this as an ordinary and necessary business expense, but will report it on the partners' Schedules K-1 as a separately stated item. Partnerships may pay health insurance premiums on behalf of any employees of the partnership and may deduct these amounts as ordinary and necessary business expenses, but they may not pay such premiums on behalf of the partners. The partnership can deduct the expense when calculating ordinary income. The amounts are reported to the partner as guaranteed payments on their Schedule K-1, for which they must also pay