John B. Barry, CPA, P.A.

Self-Employed Health Insurance deduction – Minimizing your taxes.

Self-Employed Health Insurance deduction overview:

• You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents.

One of the following statements must be true:

• You were self-employed and had a net profit for the year reported on Schedule C or F.

• You were a partner with net earnings from self-employment for the year reported on Schedule K-1.

• You received wages in the year from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.

The insurance plan must be established, or considered to be established as discussed in the following points:

• For self-employed individuals filling a Schedule C or F, a policy can be either in the name of the business or in the name of the individual.

• For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1. 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. Otherwise, the insurance plan won’t be considered to be established under your business.

• For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or the S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income.

• 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 in box 1 as wages to be included in your gross income. Otherwise, the insurance plan won’t be considered to be established under your business.

• You can’t 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 didn’t actually participate.

• 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 (under age 27), don’t use amounts paid for coverage for that month to figure the deduction.

• Any medical insurance payments not deductible as self-employed health insurance, can be included as medical expenses on Schedule A, if you itemize deductions.

• You can’t 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.
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John B. Barry, CPA, P.A.