With employers reducing the number of employees they keep on their payroll, many people are looking into various forms of self employment. Alternative forms of work such as becoming an independent contractor, freelancing, consulting and many other work-from-home income sources leave the individual in a position where they will be filing their taxes as self-employed. Some of the people who purchase health insurance on their own will be able to claim the premiums they paid as a self-employed health insurance deduction.
Who Can Use The Self Employed Health Insurance Deduction
The Internal Revenue Service has set very specific guidelines detailing who is eligible for the Self Employed Health Insurance Deduction. The individual must be self-employed and filing their taxes reporting income using Schedule F, which is for reporting self-employed income from farming, or Schedule C, which is for reporting income for all other self-employed individuals. General partners who are part of a partnership and members who are participating in a LLC that is treated as a partnership are also eligible candidates for the self-employed health insurance deduction. The only other group of people who are eligible for this tax deduction are the employees of an S – corporation who also own two or more percent of that same company’s stock.
How Much Can You Claim For The Self Employed Health Insurance Deduction
To figure out how much of the self-employed health insurance premiums you can claim as a deduction on your taxes, the equation is pretty simple. Take the amount of your self employment income for the year and divide it in half to account for the self employment taxes that will be deducted. Then subtract the dollar amount of any contributions you made throughout the year to an IRA or other approved retirement savings program. The dollar amount that you have left over is the maximum amount that you will be capable of claiming as the self-employed health insurance deduction. If you are claiming a loss for the year, you will not be able to claim your self-employed health insurance premiums as a deduction on your taxes. You may still be able to claim the premiums as health insurance expenses on Schedule A as an itemized deduction.
There is one situation where you will not be eligible to claim your self-employed health insurance premiums as a deduction. If you were eligible for a group health insurance plan through your spouse throughout the entire year, you will not be eligible for the deduction. If you paid for a whole year of self-employed health insurance premiums up front and became eligible in October for a group health insurance program through your spouse, you will only be eligible to claim a deduction for the amount of premiums for nine months of that year.
Where Do You Claim The Self Employed Health Insurance Deduction
The self-employed health insurance deduction is claimed on the IRS tax form 1040. On the 2011 Form 1040, the deduction will be made on line number 29. Keep in mind that if there were any health insurance premiums that you were not able to deduct on line number 29 you are not out of luck. You may still be able to claim the remainder of the self-employed health insurance premiums that you paid during the year on Schedule A as a medical expense. If you have any problems figuring out how to properly calculate your self-employed health insurance deduction or how to properly claim it on your tax forms you can refer to the 2011 IRS Form 1040 Instructions. If the instructions do not clarify the process of calculating and claiming your deduction for you, you should see your accountant to help you file your taxes.
