Federal Tax Deduction Makes Coverage for Self-Employed More Affordable
Self-employed individuals are directly impacted by the Affordable Care Act’s “individual mandate,” which requires that most Americans get health insurance, and the federal tax deduction available to self-employed individuals can make obtaining that coverage even more affordable.
The tax deduction is for medical, dental or long-term care insurance premiums paid for by self-employed individuals to cover themselves, their spouse and their dependents. This insurance could also cover a child who was under age 27 at the end of the year, even if the child is not a dependant.
The amount to be deducted is entered on the first page of the 1040 federal tax form – meaning it is available to those who don’t itemize their deductions – and it effectively lowers the self-employed person’s adjusted gross income.
Eligibility
To be eligible for the deduction – a person must have had a net profit from self-employment, had self-employment earnings as a partner, used an optional method to calculate net earnings from self-employment on Schedule SE or were paid wages reported on Form W-2, as a shareholder who holds more than two percent of the outstanding stock of an S corporation.
Individuals can only claim premiums for months that neither they nor their spouse were eligible to participate in an employer-sponsored health insurance plan. The amount claimed cannot surpass the earned income from self-employment.
Qualifying for the tax deduction also depends on how the insurance plan is established. For those who are self-employed and file Schedule C, C-EZ, or F – the policy can be in their name or the name of their business. For those who are a partner in a business, the policy can be either in their name or the name of the partnership, with either member of the partnership paying the premiums. For those holding more than 2 percent of an S corporation, the policy can be either in their name or the name of the S corporation, with either party paying the premiums. If person in a partnership or an S corporation is paying the premiums – they must be reimbursed and the premiums are then considered income on either Schedule K-1 (partnership) or Form W-2 (S corporation).
Options for Self-Employed Individuals
Health-Life-Dental-Insurance offers a range of coverage option for self-employed individuals looking to obtain coverage. Premiums for coverage may be eligible for the tax deduction described above. Contact us either through the website or via phone, 1-800-257-1723, to speak directly to a professional insurance agent with more than a decade of experience .