- Can the Self-Employed Have HSA & Insurance Premium Deductions?
- Can COBRA Qualify for the Self-Employed Health Insurance Deduction?
- Can I Deduct Life Insurance if I Am Self-Employed?
- Can Retired Federal Employees Deduct Health Insurance Premiums?
- Can a Sole Proprietorship Deduct Health Insurance on Its Taxes?
- Are Personal Liability Insurance Premiums Tax Deductible?
Tax law is confusing enough; when it comes to health care deductions, however, the IRS rules can enter the realm of total bewilderment. The IRS normally allows you to deduct medical expenses, including Medicare premiums, from your income, even if you are self-employed. Of course, there are a few conditions.
Members of the employed workforce take medical expenses as an itemized deduction on Schedule A. They can subtract that portion of Medicare premiums and other health costs that exceed 10 percent of their adjusted gross income as of 2013. This includes the cost of medical tests, prescriptions, hospitalizations and doctor office visits. They can't take the standard deduction and subtract health insurance premiums as well, however.
If you work for yourself as a sole proprietor, or as a partner in a business, you take Medicare premiums as an adjustment to your income. This happens on Line 29 of Form 1040; other adjustments are added to this and you subtract the sum from your gross. Another income adjustment -- available to everybody -- is any contribution you make to a qualified health savings account.
You can't take the line 29 adjustment for health insurance premiums that you include on Schedule C as a business expense. Nor can you add the Medicare premium to the itemized deductions on Schedule A, where you can itemize other health care costs. You can account for insurance premiums you paid for employees as a business expense, but this wouldn't include Medicare premiums. Beneficiaries of this program pay their own way.
The line 29 adjustment can be for standard Medicare, Medigap supplemental insurance, Advantage plans or Part D prescription plans. The Medicare policy must be in your own name or in the name of your business. If you failed to take the adjustment in previous years, you can file an amended return to refigure your net income and, possibly, get a reduction or a refund in your taxes. The IRS sets a deadline for amended returns of three years from the original due date or two years from when you paid taxes.
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