Is my health insurance considered a deductible expense?
Most definitely, especially if you are one of the millions of self employed hustlers, freelancers, digital nomads and sole proprietors that have to pay for Insurance yourself then the IRS absolutely want you to know about this deduction! The Health Insurance Deduction is generally available to you and for your spouse and dependents, so please take note!
Being self-employed means that you may be eligible to deduct the premiums that you pay for medical, dental and qualifying long term care insurance coverage for yourself, your spouse and your dependants. Keep in mind the insurance can also cover your child who was under the age of 27 at the end of 2012, even if the child was not your dependent!
Some important things know being self employed and claiming the health insurance deduction.
- This deduction applies only to your federal, state, and local income taxes, not to your self-employment taxes.
- You may not take the health insurance deduction if you are eligible from health insurance from your employer, or your spouse's employer. This is if you were perhaps freelancing as well as maintaining a job where you are employed.
- If you have a business income you may only deduct as much as you earn from your business. This would mean that if your business earns no money or incurs a loss you would get no deduction.
- If you have multiple businesses you cannot combine them together to determine the income, you can only use the income from one single business in which you chose to designate to be the health insurance sponsor. Obviously you would want to use the business in which you think will earn the most income!!
- More importantly, if you do have more than one business, you can actually have one business purchase medical insurance and the other purchase dental insurance that way you can deduct 100% of the premiums for each policy. Perfect if your business do not earn enough to cover the premiums for both policies!
When it comes to filing and tax reporting, you take this deduction straight to Form 1040 as it is a personal deduction. If you are a Sole Proprietor it does not go on your schedule C. Also if you do not claim 100% of your self employed health insurance costs on Form 1040 you may include the rest with all other medical expense in schedule A, which is subject to 10% of the gross income limit for 2013 and later. You would do this if you health insurance premiums exceed your business income.