If you are self-employed, don’t forget that you are entitled to take your health insurance premiums as an “above the line” tax deduction. With the killer cost of health insurance for the self-employed, it is one small (very small!) thing that Uncle Sam does to help make your health insurance costs more affordable.
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.
However, you cannot take this deduction for any month in which you are eligible to participate in any subsidized health plan maintained by your employer or your spouse’s employer. For example, if you paid for 12 months of health insurance coverage for yourself and your family, but you became eligible to participate in your spouse’s group health insurance in halfway through the year, then you can deduct only 6 months worth of those health insurance premiums.
In addition, if you do not claim 100 percent of your self-employed health insurance deduction, you can include the remaining premiums with your other medical expenses as an itemized deduction on Form 1040, Schedule A.
For more from the IRS on deducting medical expenses, visit the IRS website here: IRS Tax Topics-Self-Employed Health Insurance Tax Deduction.
Can you take the self-employed health insurance premium tax deduction? Tell us about it!
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