HEALTH INSURANCE DEDUCTIONS FOR SELF-EMPLOYED

If you are self – employed you may qualify to deduct as business expense the amount you paid for medical and dental insurance and qualified-long term care insurance for yourself, your spouse, and your dependents. The premiums that you pay can also cover your child under age of 27, even if that child wasn’t your dependent. A child is considered to be your son, daughter, stepchild, adopted child, or a foster child.

 

In order to deduct the medical insurance premiums paid as a business expense, at least ONE of the following statements must be true:

  • You are self-employed and report all your business income and expenses on Schedule C (or C-EZ, or F for Farming)

  • You are a partner in a partnership and have self-employment income reported on Schedule K-1

  • You use one of the optional methods to figure your net earnings from self employment on Schedule SE

  • You receive wages from an S Corporation in which you are more than a 2% Shareholder and health insurance premiums paid by the S Corporation are shown as wages on your Form W-2.

 

In order to qualify for the Health Insurance Deduction, the Health Insurance Plan must be established under the Business Name:

 

  • For self-employed individuals using Schedule C for their business tax return, the business may be either in the name of business or in the name of the individual.

  • For partners with Schedule K-1 business income, a Health Insurance Policy can be either established in the name of the partnership or in the name of one partner. If the partnership pays the premiums for you (assuming that you are one of the partners), it needs to report these premiums on Schedule K-1 as guaranteed payments to you and include these amounts in your gross income. If the Policy is under your name (assuming you are one of the partners) and you pay the premiums, than the partnership needs to reimburse you, then the partnership includes these premiums as guaranteed payments to you and include it in your income on Schedule K-1.  In any other case, the insurance will not be considered as established under your business.

  • For more than 2% Shareholders in an S Corporation, the policy can be either in the name of the S Corporation or in the name of the shareholder. Assuming that you are the Shareholder: the S Corporation can pay the premiums and include these amounts in your gross income reported on your W-2 as wages. If the policy is in your name and you pay the premiums, the S Corporation needs to reimburse you and include these amounts in your gross income reported on Form W-2 as wages. In any other case, the insurance is not considered to be established under your business name.