Is Health Insurance for the Self-Employed Tax Deductible?
- 1). Compute the net profit your business earned for the tax year. The allowable health insurance deduction cannot exceed the net profit of your business.
- 2). Determine if, at any time during the calendar year, you or your family members were eligible for a subsidized health plan maintained by your or your spouse’s employer; this would disqualify the deduction for the months in which you were eligible under that plan.
- 3). Compute the full amount of the premiums you paid during the year to the health insurance provider for your self-employed business.
- 4). Use the Self-Employed Health Insurance Deduction Worksheet in the IRS form 1040 instructions to determine the exact allowable amount. You may be eligible to deduct 100 percent of the premiums paid.
- 5). Enter that number on Line 29 on IRS form 1040.
- 6). Itemize your deductions and claim the health insurance on Schedule A. If you itemize, you will need to include your payments to health insurance providers, along with other medical expenses, on Schedule A. That total amount is then subject to the cap at 7.5 percent of adjusted gross income.
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