How to Calculate the Self Employed Health Insurance Deduction

The self-employed health insurance deduction is an above-the-line deduction that allows self-employed individuals to deduct the cost of their health insurance premiums on their federal income tax return.

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Introduction

If you are self-employed and paying for your own health insurance, you may be able to deduct the cost of your premiums on your federal income tax return. The deduction is available whether you are paying for health insurance for yourself, your spouse, or your dependents. In order to qualify for the deduction, you must meet certain criteria.

What is the Self-Employed Health Insurance Deduction?

The self-employed health insurance deduction is a tax deduction available to people who are self-employed and pay for their own health insurance. This deduction can be taken on both federal and state income taxes, and it is available to people of all ages, including those who are retired.

To calculate the deduction, you will need to know your total health insurance premiums for the year, as well as any other medical expenses you paid that were not covered by insurance. You will then subtract any contributions you made to a health savings account or Flexible Spending Account from these expenses. The resulting number is your deduction amount.

For example, let’s say you paid $5,000 in health insurance premiums for the year, and you had $1,000 in uncovered medical expenses. You also contributed $500 to a health savings account. In this case, your deduction would be $4,500 ($5,000-$1,000-$500).

If you are filing jointly with a spouse who is also self-employed, each of you can take the deduction on your own tax return. The total deducti

How to Qualify for the Self-Employed Health Insurance Deduction

In order to qualify for the self-employed health insurance deduction, you must meet the following criteria:
-You must be self-employed, either as an individual with a net profit or as a business owner with a net profit for the tax year.
-You must have paid premiums for medical and/or dental insurance for yourself, your spouse, and your dependents.
-Your medical and/or dental expenses must not have been reimbursed by another party, such as an employer or government program.

If you meet all of the above criteria, you can deduct your health insurance premiums on your federal income tax return. The deduction is taken as an above-the-line deduction, which means that it reduces your adjusted gross income (AGI).

How to Calculate the Self-Employed Health Insurance Deduction

The self-employed health insurance deduction is a deduction that allows those who are self-employed to deduct the cost of their health insurance premiums from their taxes. This deduction is available for both federal and state taxes, and can be a significant savings for those who are self-employed and have high healthcare costs.

To calculate the deduction, you will first need to determine your adjusted gross income (AGI). AGI is your total income from all sources, minus any adjustments that you are eligible for. Once you have your AGI, you will then need to subtract any deductions that you are eligible for, such as the standard deduction or any other deductions that you may qualify for. The amount that remains is your taxable income.

Once you have your taxable income, you will then need to calculate your tax liability. To do this, you will need to know your tax rate. Your tax rate is the percentage of your taxable income that you will owe in taxes. The higher your taxable income, the higher your tax rate will be.

Once you have your tax liability, you will then need to subtract any taxes that you have already paid, such as federal or state taxes withheld from your paychecks. The amount that remains is the amount of taxes that you owe.

The final step is to subtract the amount of taxes that you owe from the amount of the deduction. This final number is the amount of money that you can deduct from your taxes.

What Types of Health Insurance Plans Qualify for the Deduction

To deducted the cost of health insurance premiums on your taxes, you must be self-employed and enrolled in a qualifying health insurance plan For 2019, the deduction is available for premiums paid for medical, dental, and long-term care insurance as well as health care flexible spending arrangements. The amount of the deduction is not subject to the 7.5% rule that applies to other unreimbursed medical expenses.

How to Claim the Self-Employed Health Insurance Deduction

There are two ways to claim the self-employed health insurance deduction:
-The first way is to itemize your deductions on Schedule A (Form 1040).
-The second way is to take the deduction as an adjustment to income on Form 1040, line 29.

If you are eligible to claim the self-employed health insurance deduction, you can choose which method will give you the lower tax bill. You can switch methods from year to year.

What if You Have Employees?

If you have any common-law employees, you generally can’t take the deduction for amounts paid for their health insurance coverage. This is true even if you cover only yourself and your spouse under the plan.

What if You’re Not Self-Employed?

If you’re not self-employed, you’re not eligible to deduct your health insurance premiums on your taxes. However, there are other ways that you may be able to lower your tax bill. For example, if you’re a W-2 employee, you can ask your employer to deduct your health insurance premiums from your paycheck before taxes are calculated. This will lower your taxable income and, as a result, lower your tax bill.

Bottom Line

The self-employed health insurance deduction is a deduction that allows self-employed individuals to deduct the cost of their health insurance from their taxes. This deduction is available for both federal and state taxes, and it can be a significant savings for those who are self-employed.

To calculate the deduction, you will need to know the total amount you paid for health insurance premiums in the tax year. This includes any premiums you paid for yourself, your spouse, and your dependent children. You will also need to know the total amount of your adjusted gross income (AGI) for the tax year.

The deduction is calculated by subtracting the lesser of 7.5% of your AGI or half of the amount of your self-employment tax from the total amount you paid for health insurance premiums. For example, if you earned $50,000 in self-employment income and paid $5,000 in health insurance premiums, your deduction would be $500 (($50,000 x 0.075) – $2,500).

If you have questions about how to calculate the self-employed health insurance deduction or any other deductions on your taxes, it’s a good idea to speak with a tax professional.

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