In Oregon, my associates at BTL & Company, P C, Tax and Accounting and I, Beriso Tusse, help self employed tax payers receive all of the deductions that they are due. Filing your income taxes as a self employed worker can be difficult, and many cost saving deductions can be missed. By finding a tax preparer or accountant in your state who understands self employment, your owed taxes can decrease each year.
What is the Self Employed Health Insurance Deduction?
More than ten million tax payers in the United States are self employed, and most of them have access to specific deductions and benefits that were created for their unique income tax filing status. The Self Employed Health Insurance Deduction is one of those money saving tools that all self employed workers should be taking advantage of. Those who are self employed, and file their taxes accordingly, may claim the expenses of health insurance that they incurred for themselves and their spouse or children.
Who Can Use this Tax Deduction?
If you are self employed, it is likely that you either report your income on a Schedule F Form for farming and agriculture, or a Schedule C Form for non-agricultural income. Both of these types of tax payers may use the Self Employed Health Insurance Deduction.
Persons who own and operate a Limited Liability Company, where the income received from the running of that business is considered self employment income, may also claim the deduction. If you are the general partner of a Limited Liability Company, someone who is equally responsible for the profits or losses of the business, the deduction will apply to you as well.
Small business owners who have elected to be classified through the Internal Revenue Service as an S Corporation, and who own more than 2% of the total stock of the company, have access to the Self Employed Health Insurance Deduction.
Which Insurance Payments Qualify for the Deduction?
If you qualify as one of the tax payers listed above, there are specific health insurance premiums and costs that are deductible on your federal income tax return. All premiums paid toward general medical or health insurance, long term care insurance, and dental insurance, are included in the deduction. If you are unsure of your status and your viability, find an accountant or tax preparer in your area to help you determine your specific benefits.
If you are a self employed person who manages the health insurance premiums for your family, the costs associated with the family medical coverage is also deductible. This can include your spouse, dependents, and children under the age of 27 that are a part of your medical plan. Those grown children do not have to be claimed as your dependents.
Those who are self employed and in the position to pay supplemental Medicare premiums, the moneys that you elect to pay each year toward Medicare Part B are completely deductible.
Are There Any Limits to the Deduction?
The ability to deduct your health insurance premium costs does not mean that the entire amount spent is considered deductible. There is a maximum limit set forth by the federal government that dictates how much is truly deductible for each self employed person. To determine your total allowable health and medical insurance deduction, you must subtract your 50% given deduction for self employment taxes from your total income. From the result, retirement contributions are subtracted. The final amount is your allowable health insurance deduction. Attempting to do this calculation on your own can be complicated, to say the least. It is helpful to find a tax professional for self employment who knows how to navigate the forms and calculate the expenses correctly.
What if I Claim a Loss of Income?
Self employed tax payers who are faced with claiming a loss on their federal income tax return are not eligible for the health insurance deduction. A loss is considered to be any year where the total income is less than the total expenses paid for that time. As the Self Employed Health Insurance Deduction is calculated based upon your positive income, the numbers will not work if you suffered a loss. People who find themselves in this situation have an alternative, which is to itemize their tax return, claiming each individual deduction and expense in long form. To do this, you will need to file a Schedule A Form along with your self employment forms. Itemizing your medical deductions this way does not save you as much money, but is far better than not claiming them at all.
Where Do You Claim the Deduction on Your Taxes?
All tax payers, self employed or otherwise, must complete a Form 1040 when completing their tax return. To utilize the Self Employed Health Insurance Deduction, you will need to add the amount of your deduction onto line 29 of the 1040. Doing this lists the deduction as an adjustment to your gross income for the year. Instructions with the Form 1040 may help you determine if your medical expenses are applicable for this deduction. Any additional medical expenses that you wish to claim will need to be added to a Schedule A Form.
Contact me and the professional tax preparers at BTL & Company, P C, Tax and Accounting today for assistance with all of self employed income tax needs. They will help you find the specific tax preparer who is ideal for your situation.
BTL & Company, P C, Tax & Accounting