Advertisement
Employment Taxes
Tax misc
taxes
Deduct health insurance premium?

Taxes » Deduct Health Insurance Premium?

George SaenzQuestionDear Tax Talk,
I'm confused. I heard that sole proprietors filing a Schedule C can deduct their own health insurance so they don't have to pay the 15 percent self-employment tax. The Schedule C instructions still say not to deduct my family premium on Schedule C line 15. How do I get this break, or did I hear wrong?
-- Maurice

AnswerDear Maurice,
Your ears don't deceive you; however, the deduction you refer to is not as obvious to spot. The Small Business Jobs Act, or SBJA, passed in September 2010 made a sole proprietor's health insurance costs more in line with corporate-sponsored plans -- and it was about time. Small-business employers already have a disadvantage when shopping for health insurance coverage, on top of which they were stuck paying 15 percent additional tax on their coverage. Under the SBJA provisions, a Schedule C filer gets to reduce self-employment income by the amount of deductible heath insurance premiums paid during the year. For a small business netting around $100,000 per year, this is a great advantage. The change also affects partners in partnerships that have partnership-sponsored health plans.

The Internal Revenue Service made changes to Schedule SE to implement the tax break. As in prior years, the cost of providing health insurance coverage to you and your family should be deducted on line 29 of Form 1040. On line 3 of Schedule SE Section B, be sure to subtract the line 29 amount to realize your self-employment tax savings.

Ask the adviser

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "Taxes" as the topic. Read more Tax Talk columns.
 

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

News alert Create a news alert for "taxes"

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.26%  0.22 4.48%
15 year fixed, 0 point 3.30%  0.01 3.31%
5/1 ARM 3.30%  0.05 3.35%
 
View Rates in your area Search
Product Rate Change Last week
30K FICO-based HELOC 4.75%  0.01 4.76%
50K FICO-based HELOC 4.51%  0.01 4.52%
100K FICO-based HELOC 4.24% --0.00 4.24%
 
View Rates in your area Search
Product Rate Change Last week
60 month used car loan 2.86%  0.23 3.09%
48 month used car loan 2.79%  0.42 3.21%
60 month new car loan 2.94%  0.04 2.98%
 
View Rates in your area Search
Product Rate Change Last week
1 Year CD 0.89%  0.01 0.88%
2 Year CD 1.01%  0.02 1.03%
5 Year CD 1.59%  0.07 1.66%
 
View Rates in your area Search
Product Rate Change Last week
Balance Transfer Cards 15.71%  0.01 15.70%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement

Connect with us