Considering all the media attention on the many, many, MANY tax deductions and loopholes that Mitt Romney has taken on his income over the last couple of years, it’s kind of surprising that there’s one tax deduction that the Romneys apparently didn’t take: the self-employment health insurance tax deduction. For a lot of our self-employed friends who get hammered by self-employment taxes on both sides, the self-employment health insurance tax deduction is one of the only tax deductions that they have to look forward to during tax season. Listing self-employed health insurance premiums of $14,176 and with a top marginal tax bracket of 35%, the Romneys could have saved themselves close to $5,000 on the deduction, so it’s puzzling why the Romneys wouldn’t take the tax deduction.
The New York Times took a look at the question and they came up with one possible reason why the Romneys might not take the tax deduction:
So why didn’t the Romneys take the deduction, when they managed to reduce their taxes in so many other ways? Mr. Romney’s tax preparer, Daniel Feheley of PriceWaterhouseCoopers, did not return messages seeking comment. But Keith Hall, the national tax adviser to the National Association for the Self-Employed, pointed to a restriction on the deduction. “It is very vague but it basically states that the health policy you have must be established under the small business,” Mr. Hall said. “There’s a reasonable chance that his health insurance is a policy that he’s had for many years — could be coverage that he had while at another company, or otherwise unrelated to his self-employment. If that’s true, he’d be precluded from taking that deduction on Page 1 on his 1040.”
Further, Mr. Hall said, it may not have made financial sense to shift his insurance to take advantage of the deduction. “He may have an old group policy, and depending on what medical conditions he or his family have, to try and convert it may cost more than the savings he’d get from the deduction.” Mr. Romney’s wife, Ann, was diagnosed with multiple sclerosis in 1998.
We know, we know, it’s kind of hard to feel sorry for someone sitting on $20 million from last year alone, but it is possible that even the Romneys can be affected can be affected by pre-existing conditions like Ann Romney’s multiple sclerosis. As pretty much anyone who has had to find health insurance as a self-employed can attest, trying to get any reasonably affordable health insurance once you have been diagnosed with a pre-existing condition can be a serious problem, and it can be virtually impossible when the diagnosis is for a devastating disease like multiple sclerosis.
Now, the Romneys may have completely different reasons for not taking the self-employment health insurance tax deduction. And considering the Romneys live in Massachusetts where health insurers must take applicants with pre-existing conditions, they’re not in nearly as bad a situation as most of us with pre-existing conditions in the other states usually are. Still worth thinking about!
As a reminder, in order to take the self-employed health insurance premium tax deduction, you must fall into one of these categories:
- You were self-employed and had a net profit for the year.
- You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
- You received wages in 2011 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.
If you do, the IRS allows you to take a tax deduction for the full cost of health insurance you purchase for yourself, your spouse, and any dependents you may have on Form 1040, Line 29.
Are you taking the self-employment health insurance tax credit this year? Tell us about it!
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