Health Ins Premiums: tax deductible?

[Guest]

C'mon Somarco, I know better...I am not looking to give out tax advice...just wanted to know the general IRS rule about tax deductions for self employed individuals who pay their own health ins premiums.

Got what I needed thanks.

 

[Crabcake Johnny]

You absolutely positively can take the deduction if you're self-employed and you don't need the have the policy under your business name.

 

[somarco]

http://www.bankrate.com/brm/itax/tax_adviser/20040225a1.asp

The insurance plan must be established under your trade or business, and you cannot take this deduction to the extent that the amount of the deduction is more than your earned income from that trade or business.

You may not take this deduction for any month in which you were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer. For example, you cannot take the deduction for payroll deductions for matching health insurance contributions.

You take this deduction on Form 1040, line 29. If you itemize your deductions and do not claim 100 percent of your self-employed health insurance on line 29 (for example, because of the limitation on income), include any remaining premiums with all other medical care expenses on Schedule A (Form 1040), subject to the 7.5 percent of adjusted gross income limit.

 

[arnguy]

Somarco, what I gave was not advice but qouted Chapter and Verse directly and verbatim from the Internal Revenue Code. If you would take a look at Page 1 of Form 1040 for 2006, Line 29 in the Adjusted Gross Income section states, "Self-employed health insurance deduction (see Page 30)." It is a direct deduction from Line 22 - Total Income! I don't think it can be stated any plainer than that.

There is no place on Schedule C of Form 1040 to make a deduction for self-employed health insurance deduction. Line 14 of Schedule C is for employee benefit programs (other than pensions and profit-sharing plans) deductions which would include health insurance premiums paid for employees of the self-employed person. Line 15 of Schedule C is for insurance expenses (OTHER THAN HEALTH).

 

[Crabcake Johnny]

And if your name is the business name?

 

[somarco]

Arnguy -

The Schedule C was to show what you can & cannot deduct. I can read and understand what line 15 says.

I never suggested that anyone take a deduction on Schedule C for health insurance.

A self employed person may, in some situations, take health insurance premiums for themselves (and dependents) off 1040 or Schedule A if premiums exceed 7.5% of your AGI.

There are other ways to take medical deductions (over & above your premiums) if you have a qualified Section 105 plan as I am sure any former NASE reps will know.

 

[arnguy]

Somarco, Having spent almost as many years with the IRS as with insurance I think I have a knowledge of the tax laws that exceeds that of the average person. That being said, I have carefully perused Publication 535 and the pertinent sections of Title 26, Internal Revenue Code applicable to the deduction of health insurance premiums by a self-employed person.

I do not know how to make it any clearer that as long as a self-employed person reports a net income on Schedule C or C-EZ they may to the extent of that net income deduct the amount of the health insurance premiums they have paid up to 100% of such premiums. If they reported a net loss, of course that deduction is not available anwould be superfluous. If the deduction from the AGI on Page 1 of Form 1040 is limited, that person may add the unused portion of the health insurance premium and other qualified medical expenses. If that total exceeds 7.5% of the AGI, he/she may deduct on Schedule A of Form 1040 the total portion of the total Medical Expenses that exceeds the 7/5% of the AGI.

 

[somarco]

Arnguy -

I did not at any point disagree with your comments, nor did I ever suggest that one could take health insurance premiums off their Schedule C on line 15 or any other line.

Try decaf. It tastes just as good.

 

[K-Dub]

I as well wrote off all my premiums this past year, and no my health insurance is NOT in the business name. My accountant said this is legal and ok!

 

[arnguy]

Schedule C

If you want to give clients tax advice, you might want to put your assets in a trust for safe keeping while you are away in lock up.

Somarco, I rightfully took umbrage to that sentence whereby you implied that I was some jerk talking through my a**hole. If I give someone an undocumented opinion I do state that it is and with the caveat that it only my opinion. However, I make every effort to thoroughly as possible research the answers to tax questions. Of course, the beauty of tax law, and all law as matter of fact, is that it is written in obtuse language interspersed with a lot of jargon. That is what keeps lawyers busy and courts clogged with cases as the laws are open to interpretation.

In this instance, I thought a simple straightforward "yes" was the best answer to Kyle's question. As far as getting involved in deductions on Schedule C, I do not think that is really too relevant. Nor is the deduction of Medical Expenses on Schedule A. In my experience I have found not very many taxpa\yers who are able to deduct their medical expenses although they do have other deductions on their Schedule A. The reason being that their unreimbursed medical expenses have to be quite high to exceed the 7.5% mark.

I do not see any reason to get into doing any worksheet----plain and simple: if thee is a net income reported on Schedule C or C-EZ. then the sole proprietor may deduct the health premiums up to the amount of the net income, but not to exceed 100% of what was actually paid. If one has a net profit of $400 or more, then Self-Employment Tax (FICA and Medicare Tax) must be paid. So it is possible for a self-employed person to have no income tax liability and still owe Self-Employment Tax. From an IRS collection standpoint, the tax obligation for Self-Employment Tax is treated exactly the same as Income Tax.

P.S. I drink only KoolAid