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Old 09-06-2013, 08:33 AM
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self-employed health deduction if spouse has full-time job

Hi all-

I am currently self-employed (as a sole proprietor) and my spouse works at a non-profit. Right now we both get health insurance through her job. However, my portion of the insurance costs are not subsidized, so adding me to her insurance basically quadrupled the premium deducted from her paycheck.

Information is starting to filter out about the costs of the plans in the new health insurance exchanges will be next year, and it looks like moving from her insurance to the exchanges will reduce the premiums we pay by quite a bit. But I was wondering if I would be allowed to take my premiums as the above-the-line self-employed health insurance deduction, as I still am eligible to be on her insurance if I want to be. Some things I've found online says that you can't take the above the line deduction even if you're just *eligible* to be on a family member's plan, but I've also found a few notes (without much detail) saying that this changed in 2010 (maybe as part of the health care reforms?). If I can't take the premiums as an above-the-line deduction, can I take them as a deduction as a medical expense on Schedule A?

I'm also curious as to whether health insurance premiums deducted from your paycheck are subject to FICA tax. Even if I can deduct premiums above the line as a freelancer, that amount of freelance income would still be subject to self-employment tax, so to question of whether we'd pay FICA tax on the equivalent would help determine if it's really a better deal or not.

Thanks in advance for any help you can offer.

Josh



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Old 09-07-2013, 03:05 AM
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Originally Posted by jfruh View Post
Hi all-

#1:But I was wondering if I would be allowed to take my premiums as the above-the-line self-employed health insurance deduction, as I still am eligible to be on her insurance if I want to be. Some things I've found online says that you can't take the above the line deduction even if you're just *eligible* to be on a family member's plan, but I've also found a few notes (without much detail) saying that this changed in 2010 (maybe as part of the health care reforms?). If I can't take the premiums as an above-the-line deduction, can I take them as a deduction as a medical expense on Schedule A?

#2;I'm also curious as to whether health insurance premiums deducted from your paycheck are subject to FICA tax. Even if I can deduct premiums above the line as a freelancer, that amount of freelance income would still be subject to self-employment tax, so to question of whether we'd pay FICA tax on the equivalent would help determine if it's really a better deal or not.



Josh



#1: You can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents. However, you cannot deduct any insurance costs for any months you were eligible to participate in a subsidized group health insurance plan through your or your spouse's employer. For example, if you paid for 12 months of health insurance coverage for yourself and your family, but you became eligible to participate in your spouse's group health insurance in December, then you can deduct only 11 months worth of insurance premiums. Self-employed persons were able to include their health insurance premiums as a deduction reducing both their self-employment tax and their income tax for the year 2010 only. The deduction were taken on Line 29 of the Form 1040, and with an adjustment made the net amount of self-employed income subject to the self-employment tax on Schedule SE Line 3.
For 2009, health insurance reducesd income tax only; it did not reduce the self-employment tax. For 2011 and later years, the self-employed health insurance deduction reduces income subject to the federal income tax and does not reduce the self-employment tax.NOTE: As long as your health insurance is established in your name or the name of your business, and you don’t have the option to get coverage through another source—such as a spouse’s employer-provided plan, then, you absolutely can deduct your health care premiums

ALSO If you are reporting a loss from your self-employed activity, then you are not eligible to deduct your health insurance costs since this particular deduction is limited by your self-employment income. You can however still claim the health insurance expenses as an itemized medical deduction on Schedule A.



#2;No; health insurance premiums that you pay are, in general, tax deductible as after tax dollars; since you are self-employed, you have no access to an employer's health insurance benefits unless your spouse's employer offers family coverage. Instead, you must shop for and purchase your own health insurance policy, paying 100 percent of the premiums out of your own pocket. The IRS allows self-employed individuals to deduct health premiums on federal income taxes. You may have to wait to receive a financial break for the deduction, but it can result in significant savings on your annual tax bill. You can, however, adjust the amount of estimated tax payments you pay the IRS each quarter to account for the deduction, but be careful not to overestimate the value of your deduction, thus underpaying Uncle Sam. Failing to pay enough estimated tax to the IRS can result in fines and penalties.



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Old 09-15-2013, 11:23 PM
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Originally Posted by Wnhough View Post
#1: You can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents. However, you cannot deduct any insurance costs for any months you were eligible to participate in a subsidized group health insurance plan through your or your spouse's employer. For example, if you paid for 12 months of health insurance coverage for yourself and your family, but you became eligible to participate in your spouse's group health insurance in December, then you can deduct only 11 months worth of insurance premiums. Self-employed persons were able to include their health insurance premiums as a deduction reducing both their self-employment tax and their income tax for the year 2010 only. The deduction were taken on Line 29 of the Form 1040, and with an adjustment made the net amount of self-employed income subject to the self-employment tax on Schedule SE Line 3.
For 2009, health insurance reducesd income tax only; it did not reduce the self-employment tax. For 2011 and later years, the self-employed health insurance deduction reduces income subject to the federal income tax and does not reduce the self-employment tax.NOTE: As long as your health insurance is established in your name or the name of your business, and you don’t have the option to get coverage through another source—such as a spouse’s employer-provided plan, then, you absolutely can deduct your health care premiums

ALSO If you are reporting a loss from your self-employed activity, then you are not eligible to deduct your health insurance costs since this particular deduction is limited by your self-employment income. You can however still claim the health insurance expenses as an itemized medical deduction on Schedule A.



#2;No; health insurance premiums that you pay are, in general, tax deductible as after tax dollars; since you are self-employed, you have no access to an employer's health insurance benefits unless your spouse's employer offers family coverage. Instead, you must shop for and purchase your own health insurance policy, paying 100 percent of the premiums out of your own pocket. The IRS allows self-employed individuals to deduct health premiums on federal income taxes. You may have to wait to receive a financial break for the deduction, but it can result in significant savings on your annual tax bill. You can, however, adjust the amount of estimated tax payments you pay the IRS each quarter to account for the deduction, but be careful not to overestimate the value of your deduction, thus underpaying Uncle Sam. Failing to pay enough estimated tax to the IRS can result in fines and penalties.
Great answer... Since his wife's plan is not subsidized, what's your take on the deductibility?



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