Self Employed Health Insurance Deduction
Health insurance is a major problem and expense for self employed workers. The self employed health insurance deduction eases this somewhat.
Self Employed Health Insurance Deduction
Health insurance premiums paid by self employed workers for themselves, their spouses, and their dependents are deductible on line 29 of form 1040. Self employed workers include general partners in partnerships, limited partners receiving guaranteed payments, and even includes taxpayers who receive wages from S-Corporations when they own more than 2% of the stock.
It is possible to take 100% of the premiums paid for self employed health insurance as long as certain conditions are met. The total of the premiums can not exceed the profit of the business that actually pays for the insurance minus the deduction for self employed tax and also minus any payments made to a Keogh, SEP, or SIMPLE plan for that year. If the self employed tax payer is covered by any type of employer subsidized health insurance plan held by either himself or his spouse, they can not claim this deduction for self employed health insurance.
This restriction would apply to a single month of subsidized coverage. For example, if the tax payer is covered for one month during the year by his spouse’s work insurance group plan, the self employed health insurance plan for that month can not be claimed. The other 11 months would still be eligible, however.
You can also include premiums paid for long term care, but these are subject to restrictions based on the age of the tax payer. For tax payers under the age of 41, the maximum amount of long care premiums that are tax deductible is $280. This figure rises in gradual increments to a high of $3,500 for tax payers over the age of 70.
The rising cost of health care and health care insurance has created a crisis in the United States. A dangerously high percentage of the population has no health insurance at all. This is either because their employers do not provide it, or they elect not to receive it due to the high cost of premiums. Self employed workers do not have the luxury of employer sponsored group plans, and the cost of premiums is generally quite high. The self employed health insurance tax deduction offsets this to some degree and makes coverage more affordable for many self employed workers.