By William Perez. Tax Planning: U.S. Expert
William Perez has worked as a tax professional since 2004. He earned the enrolled agent designation by passing a comprehensive examination on federal taxes and maintains his credential by taking continuing education classes.
If you have self-employment income. you can take a deduction for health insurance expenses incurred for yourself, your spouse, and your dependents.
Who Can Claim the Self-Employed Health Insurance Deduction
- Employees of an S-corporation who own 2% or more of the S-corporation's stock.
Types of Insurance that Qualify for the Deduction
The following types of insurance premiums can be deducted:
Any premiums for the self-employed person, that person's spouse and dependents, and adult children to age 27 even if they are no longer your dependents, can be deducted as part of the self-employed health insurance deduction.
- Self-employed persons who pay supplemental Medicare premiums (such as for Part B coverage) can deduct those supplemental premiums as part of the self-employed health insurance deduction. (Source: CCA 201228037 ; see also: "Self-Employed Can Deduct Medicare Premiums, IRS Chief Counsel Advises," the Tax Advisor .)
Maximum Limit for the Self-Employed Health Insurance Deduction
Before claiming this tax deduction, you calculate your allowable health insurance deduction. Take your self-employment income, and subtract the 50% deduction for self-employment taxes, and subtract any retirement contributions made to SEP-IRA. SIMPLE-IRA. or Keogh plan. The remainder is your allowable deduction for health insurance expenses.
Health Insurance Deduction in a Loss Year
If you are reporting a loss from your self-employed activity, then you are not eligible to deduct your health insurance costs since this particular deduction is limited by your self-employment income.