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Tax question: Can I deduct Health insurance premiums?

Asked by: sfbs 556 views YA Discussion

My wife and I file a joint return. I am currently unemployed (and was unemployed all of last year). Last year (2013) my wife worked as a Independent contractor and received a 1099-misc for the money she made as a medical transcriptionist. She is considered self-employed. (She fills out a Schedule C). Line 29 of the standard 1040 states “Self-employed health insurance deduction” . Since the only health insurance we had last year was a private policy in both of our names. (for the first 10 months it was a health insurance policy under cobra from my old job which covered us both), for the last 2 months, after cobra ran out, we bought personal health coverage policy for us both, but it was listed in my wife’s name). Publication 535, as well as the instructions for Schedule C state that ” The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business.
1. For self-employed individuals filing a Schedule C, CEZ, or F, a policy can be either in the name of the business or in the name of the individual.”

A policy could not be established under the business, because in my home state you cannot set up a business policy for one individual. The business must have at least 2 workers.

My question is, even though my wife could not set up a business policy, can we still take the line 29 health insurance deduction?
I called the IRS and they stated to me they weren’t sure. Contact a CPA?

2 Answers

  1. tro on Mar 28, 2014 Reply

    as a business expense it is not claimed on sch C but 100% is allowed to claim as a credit(after line # 22 on the 1040)
    as self employed she would need to be the owner of the policy with you as an attachment to the policy
    if you paid health insurance together(not as a business expense) it would be claimed on Sch A, this means any medical is subject to the excess of 10% of your AGI, and the sch A limitations(must exceed your standard deduction to be effective)
    you do realize that a self employed person whose spouse participates in this business can file a Sch C on half the income and half the expenses
    this way both pay into their own self employment account

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  2. RoBear on Mar 28, 2014 Reply

    “allowed to claim as a credit”

    And she does taxes. sheesh.

    This is NOT a Credit, but a Deduction. Deductions Reduce Taxable Income. Credits Reduce Tax.

    It’s known as an “above the line” deduction because it is one of the very few deductions you can take without filing a Schedule A. It is “above the line” because it is above the bottom line (AGI) of the Form 1040. Page 1 deals primarily with Income. In order to accommodate these few deductions, the IRS modified the form and placed them here.

    Use the Worksheet on Page 31 of the 1040 Instructions to determine how much, if anything, you can deduct.


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