Self-Employed Health Insurance Deduction

What is a Self-Employed Health Insurance Deduction?

The Self-Employed Health Insurance Deduction is defined as a tax deduction that totally covers long-term insurance premiums for self-employed people.

Being self-employed sometimes means paying for out-of-pocket health. However, self-employed health insurance deductions can help reduce some of those costs overall. And while such deductions are not limited to health insurance, not all self-employed people are eligible for these deductions.

How does the Self-Employed Health Insurance Deduction work?

This type of insurance deduction allows certain self-employed people to reduce the overall premiums that they pay for:

• Medicare insurance
• Medical insurance
• Long-term care insurance
• Dental and vision insurance

In addition, to qualify for the deduction, the individual must not also be eligible for any employer-sponsored insurance plan. If the individual is self-employed, for example, but their spouse has a full-time job, and the company includes spouses in the plan, the individual would not be eligible for this deduction. In that case, the individual can't claim the self-employed health insurance deduction, even if they choose not to enroll in the employer-sponsored plan.

While there is no limit for the deduction, it is limited to one's net profit from self-employment. In other words, if the business doesn't earn a profit, the individual can't take the deduction.

While there's no limit to the amount of medical, dental, and vision insurance premiums that can be deducted, the IRS limits deductions for long-term care insurance premiums. That cap is based on the individual’s age at the end of the tax year.

Conclusion

Processing an individual’s taxes correctly can be challenging without the latest information and the right experts who continue to monitor ever-changing regulations. Therefore, when it comes to deductions, it’s important to be well-versed in all forms of payroll deductions and to explain how they work. Working with professionals within the financial industry is recommended when dealing with tax and deduction-related issues.