Self-Employed Health Insurance Offers Tax Benefits
If you are an entrepreneur, or work at home person, you know the importance of having self-employed health insurance. Whether you work out of your home, or at an outside location, being self-employed means only one thing – you will be responsible for the cost of health insurance.
In the United States, those utilizing self-employed health insurance can face a substantial financial burden. The best that can be made of this expense is to take advantage of every available legal tax benefit. In almost all cases, self-employed health insurance costs are probably a deductible expense for you. These costs, can at least help to reduce your tax burden. To be sure, consult a tax professional for your specific circumstances.
The United States Internal Revenue Service (IRS) website says the following regarding the utilization of self-employed health insurance: “If you were self-employed and had a net profit for the year, were a general partner (or a limited partner receiving guaranteed payments), or received wages from an S corporation in which you were a more than 2% shareholder (who is treated as a partner), you may be able to deduct, as an adjustment to income, all of the amount paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, and dependents.”
The IRS website goes on to explain that the self-employed health insurance plan must have been established under your business entity. They continue by stating, the deduction for self-employed health insurance premiums cannot exceed the amount of your earned income. Finally, the deduction for self-employed health insurance cannot be claimed for any month in which you were eligible to be covered by your employer (if you have a second job), or your spouse’s employer.
Recording these expenses is quite easy. Should you qualify for the self-employed health insurance deduction, you will find, included with your 1040 Tax Package, the Self-Employed Health Insurance Deduction Worksheet.
However, if you had more than one source of income that was subject to self-employment tax, you cannot use the Self-Employed Health Insurance Worksheet. In addition, if you are filing either Form 2555 (Foreign Earned Income), or Form 2555-EZ (Foreign Earned Income Exclusion), you also cannot use the worksheet. Finally, premiums and costs associated with qualified long-term care insurance also cannot be used with the Self-Employed Health Insurance Worksheet.
Should you fall into one of the above categories, and are prohibited from using the worksheet to figure your self-employed health insurance deduction, you will find a worksheet in IRS Publication 535 (Business Expenses). Whatever your self-employed situation, you should be able to deduct some, or possibly most of your self-employed health insurance premiums.
