Question

Mike and Rose are married and file jointly. Mike earns $45,000 from wages and Rose reports $450 on her Schedule C as an artist. Since Mike's work does not offer health insurance, Rose pays the following health insurance premiums from her business account: Family health insurance $9,500 Family dental insurance 1,000 How much can Mike and Rose deduct as self-employed health insurance? o o - Format A c « Fa

Answer 1

Self-employed people who qualify are allowed to deduct 100% of their health insurance premiums (including dental and long-term care coverage) for themselves, their spouses, and their dependents. However, this is not a business deduction. It is a special personal deduction for the self-employed. This deduction applies only to your federal, state, and local income taxes, not to your self-employment taxes. The self-employed health insurance deduction is a personal deduction. This means it doesn’t reduce your business income for self-employment tax purposes.

The entire cost of premiums paid for medical insurance, dental insurance, and long-term care insurance are deductible for policies that cover you, your spouse, your dependents, or adult children who have not reached the age 27 as of the last day of the tax year.

This health insurance write-off is entered on page 1 of Form 1040, which means you benefit whether or not you itemize your deductions.

Qualification for claiming the deduction:

1. You may not take the self-employed health insurance deduction if you are eligible to participate in a health insurance plan maintained by your employer or your spouse’s employer.

2. You may deduct only as much as you earn from your business. If your business earns no money or incurs a loss, you get no deduction. If you have more than one business, you cannot combine the income from all your businesses for purposes of the income limit. You may only use the income from a single business you designate to be the health insurance plan sponsor.

In the given case Rose reports $450 income on her schedule C and pays $9500 as family health insurance and $1000 as family dental insurance. Mike's work does not offer any health insurance. So Rose is eligible to claim a self-employed health insurance business.

In the given case the amount of profits from Schedule C is $450. So the maximum amount of deduction Rose can claim is $450.

Mike cannot claim any amount of Self-employed health insurance