Self Employed Health Insurance Deduction

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SpideyIndexer
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Self Employed Health Insurance Deduction

Post by SpideyIndexer » Wed Oct 03, 2018 11:34 pm

I have been looking into the eligibility for this deduction. Both my spouse and I have been self-employed for a few years. We have had a a family policy under my name but I have moved on to Medicare, so my spouse has individual health insurance coverage.

From reading the IRS documents, I gather that the deduction will only apply for a policy in the name of the business or the business owner if self-employed. This would prohibit splitting the deduction for premiums for family plan between a two self-employed spouses.

Now that we have separate policies, we both may be able to claim the individual deductions. Would Medicare premiums be deductible as a form of self-employed health insurance?

RickBoglehead
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Re: Self Employed Health Insurance Deduction

Post by RickBoglehead » Thu Oct 04, 2018 6:00 am

A simple Google search shows that Medicare premiums are indeed deductible, but cannot exceed the person's earnec income after expenses.

I don't agree that a self employed person can't deduct family coverage that they pay for.

You cannot be self employed, your spouse has the policy and is not self employed, and take the deduction for their policy.
Last edited by RickBoglehead on Thu Oct 04, 2018 1:17 pm, edited 1 time in total.

SpideyIndexer
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Re: Self Employed Health Insurance Deduction

Post by SpideyIndexer » Thu Oct 04, 2018 11:43 am

RickBoglehead wrote:
Thu Oct 04, 2018 6:00 am
A simple Google search shows that Medicare premiums are indeed deducttible, but cannot exceed the person's earnec income after expenses.

I don't agree that a self employed person can't deduct family coverage that they pay for.

You cannot be self employed, your spouse has the policy and is not self employed, and take the deduction for their policy.
Rick, yes I discovered that Medicare premiums are allowed for this deduction.

Regarding the second point, I was trying to say the deduction applies to the policyholder of a family policy when both spouses are self employed, different business. They cannot split the deduction. Anyone, feel free to chime in if this is incorrect. If I want to research the actual tax code wording, would I go to the ACA?

RickBoglehead
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Re: Self Employed Health Insurance Deduction

Post by RickBoglehead » Thu Oct 04, 2018 1:16 pm

SpideyIndexer wrote:
Thu Oct 04, 2018 11:43 am
RickBoglehead wrote:
Thu Oct 04, 2018 6:00 am
A simple Google search shows that Medicare premiums are indeed deducttible, but cannot exceed the person's earnec income after expenses.

I don't agree that a self employed person can't deduct family coverage that they pay for.

You cannot be self employed, your spouse has the policy and is not self employed, and take the deduction for their policy.
Rick, yes I discovered that Medicare premiums are allowed for this deduction.

Regarding the second point, I was trying to say the deduction applies to the policyholder of a family policy when both spouses are self employed, different business. They cannot split the deduction. Anyone, feel free to chime in if this is incorrect. If I want to research the actual tax code wording, would I go to the ACA?
If person A pays for a family policy, they can deduct it. Person B, who pays nothing for the policy, cannot deduct it. That's my understanding.

Good Listener
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Re: Self Employed Health Insurance Deduction

Post by Good Listener » Thu Oct 04, 2018 3:44 pm

My understanding, having been self employed for several years up to 2 years ago, is that the insurance must be in the name of the business. Not the business owner. I just had personal policies and never deducted it.

Spirit Rider
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Re: Self Employed Health Insurance Deduction

Post by Spirit Rider » Thu Oct 04, 2018 11:02 pm

Good Listener wrote:
Thu Oct 04, 2018 3:44 pm
My understanding, having been self employed for several years up to 2 years ago, is that the insurance must be in the name of the business. Not the business owner. I just had personal policies and never deducted it.
Your understanding is not correct starting in 2005.

IRS Chief Counsel Advice (CCA) 2005240001 states:

A self-employed individual who is a sole proprietor may deduct the medical care insurance costs of the sole proprietor and his or her family from the earned income of his or her trade or business when the health insurance policy purchased by the sole proprietor is issued in his or her individual name and not in the name of the sole proprietor’s trade or business.

In fact, starting in 2012 IRS Chief Counsel Advice (CCA) 201228037 states that Medicare premiums are deductible and they clearly are not in the name of the business.

Good Listener
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Re: Self Employed Health Insurance Deduction

Post by Good Listener » Fri Oct 05, 2018 7:44 pm

Spirit Rider wrote:
Thu Oct 04, 2018 11:02 pm
Good Listener wrote:
Thu Oct 04, 2018 3:44 pm
My understanding, having been self employed for several years up to 2 years ago, is that the insurance must be in the name of the business. Not the business owner. I just had personal policies and never deducted it.
Your understanding is not correct starting in 2005.

IRS Chief Counsel Advice (CCA) 2005240001 states:

A self-employed individual who is a sole proprietor may deduct the medical care insurance costs of the sole proprietor and his or her family from the earned income of his or her trade or business when the health insurance policy purchased by the sole proprietor is issued in his or her individual name and not in the name of the sole proprietor’s trade or business.

Maybe I took that view because I didn't form an LLC or corporation and just filed individually with Schedule C. Could that matter? If I cheated myself you folks all owe me some money.

Spirit Rider
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Re: Self Employed Health Insurance Deduction

Post by Spirit Rider » Fri Oct 05, 2018 9:52 pm

Good Listener wrote:
Fri Oct 05, 2018 7:44 pm
Maybe I took that view because I didn't form an LLC or corporation and just filed individually with Schedule C. Could that matter? If I cheated myself you folks all owe me some money.
It doesn't matter what the business entity type is.

From the Form 1040 Instructions, Line 29 Self-Employed Health Insurance Deduction. A sole proprietorship, partnership or S-Corp in an LLC or not can have a policy in the individual's name. Here is the relevant statement for sole proprietorships.

If you are filing Schedule C, C-EZ, or F, the policy can be either in your name or in the name of the business.

Greenman72
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Re: Self Employed Health Insurance Deduction

Post by Greenman72 » Sat Oct 06, 2018 8:14 am

As a general rule, it's not sufficient to say that "X is deductible". You have to know WHERE it is deductible.

Is it deductible on Sch. C (which reduces SE tax and AGI)?
Is it deductible on Sch. E (which reduces AGI, but not SE tax)?
Is it deductible on Schedule D (which reduces AGI, but reduces your already-low capital gains rates)?
Is it deductible in the "adjustments" section (which reduces AGI, but not SE tax)?
Is it deductible on Sch. A (which does not reduce AGI, and subject to limitations)?
Is it deductible as a credit on Page 2 of the 1040 (which doesn't reduce taxable income at all, but gives a credit, which is better)?

Good Listener
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Re: Self Employed Health Insurance Deduction

Post by Good Listener » Sat Oct 06, 2018 3:57 pm

Spirit Rider wrote:
Fri Oct 05, 2018 9:52 pm
Good Listener wrote:
Fri Oct 05, 2018 7:44 pm
Maybe I took that view because I didn't form an LLC or corporation and just filed individually with Schedule C. Could that matter? If I cheated myself you folks all owe me some money.
It doesn't matter what the business entity type is.

From the Form 1040 Instructions, Line 29 Self-Employed Health Insurance Deduction. A sole proprietorship, partnership or S-Corp in an LLC or not can have a policy in the individual's name. Here is the relevant statement for sole proprietorships.

If you are filing Schedule C, C-EZ, or F, the policy can be either in your name or in the name of the business.
Clear enough. Thanks. Well, I guess the feds owe me something. I cant deal with amending returns...

SpideyIndexer
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Re: Self Employed Health Insurance Deduction

Post by SpideyIndexer » Tue Oct 09, 2018 11:33 am

Good Listener wrote:
Sat Oct 06, 2018 3:57 pm
Spirit Rider wrote:
Fri Oct 05, 2018 9:52 pm
Good Listener wrote:
Fri Oct 05, 2018 7:44 pm
Maybe I took that view because I didn't form an LLC or corporation and just filed individually with Schedule C. Could that matter? If I cheated myself you folks all owe me some money.
It doesn't matter what the business entity type is.

From the Form 1040 Instructions, Line 29 Self-Employed Health Insurance Deduction. A sole proprietorship, partnership or S-Corp in an LLC or not can have a policy in the individual's name. Here is the relevant statement for sole proprietorships.

If you are filing Schedule C, C-EZ, or F, the policy can be either in your name or in the name of the business.
Clear enough. Thanks. Well, I guess the feds owe me something. I cant deal with amending returns...
Can or can't deal with amending? It's not that bad for what can be a hefty refund. However first check to see if your health insurance deduction is limited due to things like solo 401(k) contributions plus half of business tax. There's a worksheet.

Good Listener
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Re: Self Employed Health Insurance Deduction

Post by Good Listener » Tue Oct 09, 2018 7:28 pm

Thanks. I mean do not want to deal with the process. I'm almost 666 and have too many annoyances already. But of course you're right; I'm just a strange bird.

Greenman72
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Re: Self Employed Health Insurance Deduction

Post by Greenman72 » Wed Oct 10, 2018 6:26 am

Good Listener wrote:
Tue Oct 09, 2018 7:28 pm
Thanks. I mean do not want to deal with the process. I'm almost 666....
Holy smokes. You should change your screen name to Methuselah.

vtMaps
Posts: 425
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Location: central Vermont

Re: Self Employed Health Insurance Deduction

Post by vtMaps » Wed Oct 10, 2018 8:22 am

Spirit Rider wrote:
Thu Oct 04, 2018 11:02 pm
IRS Chief Counsel Advice (CCA) 2005240001 states:

A self-employed individual who is a sole proprietor may deduct the medical care insurance costs of the sole proprietor and his or her family from the earned income of his or her trade or business when the health insurance policy purchased by the sole proprietor is issued in his or her individual name and not in the name of the sole proprietor’s trade or business.

In fact, starting in 2012 IRS Chief Counsel Advice (CCA) 201228037 states that Medicare premiums are deductible and they clearly are not in the name of the business.
We are both on medicare and my wife is self-employed. I take this to mean that we can deduct her premiums, but not mine. Is that correct?

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

bhsince87
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Re: Self Employed Health Insurance Deduction

Post by bhsince87 » Wed Oct 10, 2018 10:04 am

Greenman72 wrote:
Wed Oct 10, 2018 6:26 am
Good Listener wrote:
Tue Oct 09, 2018 7:28 pm
Thanks. I mean do not want to deal with the process. I'm almost 666....
Holy smokes. You should change your screen name to Methuselah.
Or Satan!!!!! :twisted:
Retirement: When you reach a point where you have enough. Or when you've had enough.

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: Self Employed Health Insurance Deduction

Post by Spirit Rider » Wed Oct 10, 2018 2:00 pm

vtMaps wrote:
Wed Oct 10, 2018 8:22 am
We are both on medicare and my wife is self-employed. I take this to mean that we can deduct her premiums, but not mine. Is that correct?
The self-employed health insurance deduction is for the self-employed individual, their spouse and any dependents <= age 26.

She can deduct premiums for both of your Medicare Part B & D , Medigap plans, dental insurance and an age dependent amount of LTC insurance.

vtMaps
Posts: 425
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Location: central Vermont

Re: Self Employed Health Insurance Deduction

Post by vtMaps » Wed Oct 10, 2018 2:16 pm

Spirit Rider wrote:
Wed Oct 10, 2018 2:00 pm
She can deduct premiums for both of your Medicare Part B & D , Medigap plans, dental insurance and an age dependent amount of LTC insurance.
That surprises me, but I am very pleased to read your opinion. :D

But what about the part that says:
the health insurance policy purchased by the sole proprietor is issued in his or her individual name and not in the name of the sole proprietor’s trade or business.
We have individual medicare policies, no family plan... my medicare bills are in my name.

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: Self Employed Health Insurance Deduction

Post by Spirit Rider » Wed Oct 10, 2018 2:30 pm

See (CCA) 201228037 from my earlier post. That ruling specifically allows a spouse's Medicare premiums to be deducted even though not in the name of the business or the self-employed individual.

This deduction was not allowed prior to 2012.

Good Listener
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Re: Self Employed Health Insurance Deduction

Post by Good Listener » Wed Oct 10, 2018 7:38 pm

bhsince87 wrote:
Wed Oct 10, 2018 10:04 am
Greenman72 wrote:
Wed Oct 10, 2018 6:26 am
Good Listener wrote:
Tue Oct 09, 2018 7:28 pm
Thanks. I mean do not want to deal with the process. I'm almost 666....
Holy smokes. You should change your screen name to Methuselah.
Or Satan!!!!! :twisted:
Thanks for finding my error. With my chronic neck and shoulder pain (but I do walk 1.5 hours a day) I would hate living for 666 years. That would be torture. I am almost 66 to set the record straight.

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