Self-Employed Health Insurance Deduction
Owners of Sole Proprietorships, single member LLCs, partnerships, multi-member LLCs, and certain S-Corps
may be able to take an above the line deduction on their personal federal tax returns for Healthcare costs,
including the costs for Medicare, thereby reducing Adjusted Gross Income, Taxable Income, and Federal Income
Self-employed people who qualify are allowed to deduct
100% of their health insurance premiums (including dental
and long-term care insurance) for themselves, their spouses,
and their dependents. This is not a business deduction but a
personal deduction, taken as an Adjustment to Income on
Line 29 of Schedule 1 and subtracted from Total Income on
line 6 of Form 1040 to arrive at Adjusted Gross Income.
To qualify for this deduction:
(1) You can deduct only as much as you earn from your business. If your business does not have Net Income, but
a loss, you cannot take this deduction. For example, if your total Medical Insurance Premiums are $6,000 for
the year but you only realize a Net Income of $3,500 from your business and you otherwise qualify for the
deduction, you can only deduct $3,500 of your Insurance costs. If you have more than one business, you cannot
combine the income from all your businesses to calculate your Net Income that qualifies you for the deduction.
You can only use the Net Income from a single business.
(2) You may not take the self-employed health insurance deduction if you are eligible to participate in a health
insurance plan maintained by your employer or your spouse’s employer.
(3) Only a limited amount of long-term care insurance premiums are deductible each year depending upon your
attained age before the close of the year. If 40 or younger the deductible amount for 2019 is $420. If over 40 but
not older than 50 the amount is $790. If over 50 but not older than 60 the amount is $1,580. If over 60 but not
older than 70 the amount is $4,220. If older than 70 the amount is $5,270.
Certain requirements exist as to how the premiums are paid for partners in a partnership or multi-member
LLCs or S Corp owners that own 2% or more of shares. See the links:
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