As a business owner, you likely pay for your own health insurance. And there’s a good chance you’ve seen the cost of your insurance premiums go up dramatically in recent years.
One way to offset those higher premiums is to take a deduction for the health insurance premiums you pay as a self-employed person. Here’s what you need to know about the tax deduction or self-employed health insurance.
Can I take the self-employed health insurance deduction?
If you’re self-employed and plan to report a net profit on Schedule C, you may qualify to claim the self-employed health insurance deduction. You may also qualify for the credit if you meet one of the other requirements.
You can’t claim the deduction for any month you are eligible to participate in a subsidized plan. It doesn’t matter if that plan is maintained by an employer of you, your spouse, or your child under age 27.
What if I am also eligible for subsidized health insurance for part of the year?
You can only take the deduction for months in which you were not eligible for a subsidized employer plan. For example, if you were eligible for such a plan for six months of the year, you can only deduct your self-employed health insurance premiums for the remaining six months.
Who can my self-employed health insurance plan cover?
The plan can cover you, your spouse, and your dependents. It can also cover your children under age 27 who may not be your dependents.
Do I have to itemize deductions to take this deduction?
You can deduct self-employed health insurance premiums directly on line 28 of Form 1040. That means you can take advantage of the tax benefit even if you don’t itemize deductions.
Does my business have to hold the policy?
The insurance policy can be issued in the business’ name or in your name.
Is there a limit on how much I can deduct?
Your self-employment income can limit the deduction. You can’t deduct more than your net profit on Schedule C, reduced by your self-employment tax paid and your contributions to a SEP, SIMPLE, or qualified retirement plan for yourself.
If you use TaxAct to prepare your taxes, the program does the calculations for you and determines your qualified deduction.
If your deduction is limited by your net self-employment income, you can still deduct the excess premiums on Schedule A with your itemized deductions. However, you may not benefit from claiming your premiums unless your total medical expenses, including premiums, exceed 7.5 percent of your adjusted gross income
Can I include premiums for Medicare or long-term care insurance?
Yes, you can use both Medicare and long-term care insurance premiums to compute the self-employed health insurance deduction.
Source : TaxAct Blog