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Self-employed Health Insurance

The self-employed health insurance income tax deduction can help you deduct health insurance premiums (including dental and long term care coverage) for yourself, your spouse, and your dependents.  Self-employed people that have Medicare coverage may deduct your Medicare premiums as part of the self-employed health insurance deduction – this includes Medicare Parts (not just part B).  the insurance can cover your child under age 27 even if the child was not your dependent.  A child includes your son, daughter, stepchild, adopted child, or foster child. A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

What are the requirements to claim the deduction?

  • You were self-employed and has a net profit for the year reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business; or Schedule F (Form 1040), Profit or Loss From Farming.
  • You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc. box 14, Code A
  • You used one of the optional methods to figure your net earnings from self-employment on Schedule SE
  • You received wages form 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, Wage and Tax Statement.

What are the requirements for the insurance plan?

  • For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual.
  • For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
  • For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.