Discussion:Self-employed health insurance deductablilty
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Discussion Forum Index --> Basic Tax Questions --> Self-employed health insurance deductablilty
Discussion Forum Index --> Tax Questions --> Self-employed health insurance deductablilty
Corkballman (talk|edits) said: | 14 February 2009 |
| I have a client who is both a W-2 employee and sefl-employed. Both the W-2 and the sefl emmployment are from teaching. Additionally, both incomes are about equal. The client pays for his/her own insurance. Can my client take the sefl-employed health insurance deduction on the front page of the 1040 or should the deduction be allocated between the schedule C and Schedule A. Let's also assume that the client's employer (W-2) does not offer health insurance. I'm pretty sure if the employer does, that the client cannot take the front page deduction. | |
| 14 February 2009 | |
| Yes, client is eligible for SEHI based on his Sch C income if he was not eligible for coverage through other ER and if his SE income is equal to or greater than the cost of his SEHI. | |
| 14 February 2009 | |
| I did not know that SEHI eligibility was conditioned on not being eligible for Employer coverage. Is that only direct eligibility, or wouldl it also include eligibility to participate in spouse's employer plan? | |
Harry Boscoe (talk|edits) said: | 14 February 2009 |
Here's what section 162 of the Infernal Revenue Code says about "other coverage":
Other coverage:
Paragraph (1) [which allows the deduction on page 1 for self-employed health
insurance] shall not apply to any taxpayer for any calendar month for which the
taxpayer is eligible to participate in any subsidized health plan maintained by any
employer of the taxpayer or of the spouse of the taxpayer.
| |
| 15 February 2009 | |
| I wonder if the fact that the plan is not age weighted amounts to a subsidy. By that I mean that the insurance cost is the same whether you are 18 or 68. | |
| 15 February 2009 | |
| Just to add, the SEHI plan must be established under the trade or business.... (2008 pub 17, pg 146)
Frank R. | |
Harry Boscoe (talk|edits) said: | 15 February 2009 |
| And I think there's a ruling or something somewhere that - at least in the case of S corporations - allows that what the business actually does can be treated as a plan even though it's not even in writing. | |
| 16 February 2009 | |
| Frank, can you elaborate on the fact that the plan must be established under the trade or business. I have always been confused about that. Does that mean that if the insurance bills the client directly and not in the business name, he cannot take it? I have always taken it for my sole proprietors whether billed to them personally or not. Can you clear up my thinking here? | |
| 16 February 2009 | |
| Other coverage: Paragraph (1) [which allows the deduction on page 1 for self-employed health insurance] shall not apply to any taxpayer for any calendar month for which the taxpayer is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer.
I suppose this would include anyone getting insurance through Cobra? | |
| 16 February 2009 | |
| There was a revenue ruling or clarification as to SEHI plans in which they state that the plan does not have to be established under the trade of business. It can be an individual plan taken out by a sole proprietor under his or her own name, etc.
My understanding is that Cobra and or Medicare plans do not meet the test. But most any other plan would. | |
Harry Boscoe (talk|edits) said: | 16 February 2009 |
| Be careful using the words "plan", "policy" and "coverage". While the statute requires that the self-employed health insurance "plan" be established by the business, we've found that the "policy" - the insurance policy itself - need not be in the business's name, at least in some cases. Folks have been pounding on this and other "SEHI" issues for many years now, and some very beneficial and illuminating results are shown in the Service's letter about SEHI "plans" maintained by S corporations for their employee-shareholders. I can't cite it right now, but when we find it, you'll see what an incredible nightmare it has been to trying to interpret the law that Congress wrote to allow this deduction.
Congress should consult with knowledgeable professionals before they draft laws.... [edited in: See IRS Notice 2008-1. It's the one that covers all these issues. It wasn't actually written, I understand, by IRS, but by somebody outside IRS and was given to them to think about and to publish if they accepted it. Does somebody know who it was that submitted this to the IRS?] | |
| 16 February 2009 | |
| Agreed. If we take the literal language of the statute, an S corporation could adopt a plan allowing for reimbursements of Medicare premiums. | |
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