Self Employed Health Insurance Deduction
Jun 17th, 2011
Now that more and more people are finding it hard to land a job, being self-employed has become a lucrative option. Of course it has its own share of ups and downs. Perhaps it’s biggest advantage is freedom and flexibility. You are not answerable to anyone. You control how the money is spent and how things will run in your business endeavor. However this solitude also becomes a disadvantage. You are on your own in managing your finances and in acquiring health insurance for self employed.
Looking for a self employed health insurance is just part of the challenge. The harder part is looking for one that is comprehensive for your needs yet will not cost you so much especially if you’re just starting.
Since you apply for it on your own and not through a group, you can expect the premiums to be quite costly. But there are some things that you should know in order to save on your costs.
The most important thing you should know of is the self employed health insurance deduction. This allows you to deduct the amount spent for health insurance for you, your spouse and your dependents. In 1987, self employed individuals were entitled to a twenty-five percent deduction. But better news came in 2003 when deduction was raised to one hundred percent.
Who are eligible for this deduction?
Self employed individuals who file income on Section C of the tax form (or Section F for farmers)
Partners in a partnership and members in an LLC who are also receiving income
Employees for an S-Corporation whose share has at least 2% share of the stocks
Your deduction should be reflected on Line 29 of your 1040 tax form. This is the amount that will be reduced from your adjusted gross income for what you spent on your health insurance premium.
For all medical expense that can not be deducted from your 1040, you can indicate it on the Schedule A of your tax form. But deduction will only be applied if you have incurred a lot of medical expense amounting to more than 7.5 percent of your adjusted gross income.
This tax deduction is not a product of the health care reform. Tax deductions were implemented since 1987. But as more and more provisions of the new law are rolled out just stand by and see how else it can help you reduce costs with your self employed medical insurance.
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