Discussion Archives:Medicare B and SE Health Insurance

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Advanced Tax Questions --> Medicare B and SE Health Insurance


Discussion Forum Index --> Tax Questions --> Medicare B and SE Health Insurance


* Update: SE Health Insurance - Part B - Letter to Congress.


Dhtax (talk|edits) said:

3 March 2009

At the risk of opening up a can of worms, did we ever come to agreement on whether Med B premiums can be counted as part of the SE Health Insurance adjustment? Yes, I've read the other posts, and it looked like posters still disagreed at the end. Or maybe I missed the definitive answer amidst all the verbiage.

David H

Death&Taxes (talk|edits) said:

3 March 2009
I think we reached the conclusion that you pays your money, you takes your choice.

I think I saw this question in NATP's most frequently asked questions for 2008. Their answer: "No" citing that it could not qualify as a plan established under a trade or business and they cited FSA 3042.

Arman barsamian (talk|edits) said:

4 March 2009
No.

See Chief Counsel Advice 200524001 and the Reynolds case for a similar government health plan, TC Memo 2000-20, affirmed by the 9th Circuit: 90 AFTR 2d 2002-5294. Reynolds points us to: King v. Commissioner, T.C. Memo. 1996-231 [1996 RIA TC Memo ΒΆ96,231] where a government plan is specifically disallowed as a Section 162(l) plan. "Petitioner's Government-sponsored health plan was not established with respect to his Schedule C business."

Note: Medicare is not insurance, but rather part of the Social Security Act, a welfare benefit, that is not a trade or business plan for Section 162(l) purposes.

Edcosoft (talk|edits) said:

6 March 2009
The "Plan", adopted by the employer, is to pay the premiums for whatever health insurance is obtainable. Per Webster, a "plan" is a course of action, not an insurance policy. All the above cites missed the point in an effort to upset common sense.

ed

Riley2 (talk|edits) said:

6 March 2009
I see no problem with deducting the Medicare premiums as SE health insurance. A corporate employer is allowed to reimburse the Medicare insurance premiums of its employees if the company plan provides for such reimbursement. I agree with Ed -- a plan is distinguished from a policy.

Jake (talk|edits) said:

6 March 2009
Riley2 has convinced me to deduct my Part B, Part D and AARP supplement as self employed heath insurance. I'll let you know if I get audited.

If there is anything in the tax law that makes no sense it is the way medical expenses are handled. Under a "corporate" shield, and using a flexible plan even aspirin, and maybe condoms, become deductible. Outside of that flex plan it is clear that non-prescription drugs are not deductible even if medical expenses exceed 7.5% of agi. AND those deductions are before calculating FICA tax. Then the IRS further liberalizes the flex plan by permitting carryover expenses into the first three months of the following year. Now we who are outside of this Congressionally sanctioned tax benefit ought to be able to deduct condoms since we are getting screwed.

Death&Taxes (talk|edits) said:

6 March 2009
As I said, you pays your money, your takes your choice. There are several long discussions on this issue.

For the record, my corporation reimbursed my medicare costs last year when I had to pay them myself.

Solomon (talk|edits) said:

6 March 2009
"NOTE: Thank you for your inquiry. Our response to your tax law question appears below. I hope this information has been helpful. If you have a follow-up question or another general tax law question, please return to our web site at: ( http://www.irs.gov ) to submit it. Please do not use your "reply" button to respond to this message.

For privacy and security purposes, your incoming e-mail text has been deleted in this response because it either asked a tax account question, which we do not answer (we answer tax law issues only), or it contained personal identification information.

The Answer To Your Question Is:

Thank you for using our Email service. Assuming you meet all the requirements to take the self-employed health insurance deduction, you would be able to use the Medicare Part B Premiums."

Cotopop (talk|edits) said:

17 May 2010
A little slow so it's a good time to add a little more controversy to the subject. Last week at the Super Tax Seminar in Las Vegas I asked 3 different incredibly talented instructors the question about deducting Medicare B and Medicare D premiums for self employed. Unfortunately it was not the answer I wanted but all 3 answered the same resounding NO and all 3 cited the same reason. The reason they stated seems different from other threads on this subject. All 3 independently stated that it was because Medicare B and now Medicare D are subsidized health programs.

WIBadgerCPA (talk|edits) said:

17 May 2010
Since the 1040 instructions (I know, not authoratative) specifically state that medicare premiums cannot be used for this deduction, if you use it, I assume you would need to disclose that information?

Kevinh5 (talk|edits) said:

17 May 2010
Tom, which instructors did you ask? My guess is: Claudia Hill, Sharon Krieder, and Karen Brosi.

Kevinh5 (talk|edits) said:

17 May 2010
I'll throw Vicki Mulak in as a pinch hitter.

CathysTaxes (talk|edits) said:

17 May 2010
WIBadger is right. I just looked at the 1040 instructions and they specifically say:

"Medicare premiums cannot be used to figure the deduction"

Cotopop (talk|edits) said:

17 May 2010
Kevin ,

2 out of 3 correct (Sharon Krieder & Karen Brosi) .In addition Alan Pinck stated the same.

Tom

Kevinh5 (talk|edits) said:

17 May 2010
Ahhhh. You must have gone to Alan's 'Is it deductible' session!

Cotopop (talk|edits) said:

17 May 2010
Yes it was probably one of the better of the 9 sessions I attended . Overall I was very disappointed in the conference as it was basiclly geared towards 2009 tax returnsand had very little about 2010 and other important tax topics.

Kevinh5 (talk|edits) said:

17 May 2010
It is very hard to write an update class in April (that's when the texts were due to the publisher), but Vicki did have a 1040 update class and Alan did have a business update class. I attended Vicki's.

Traditionally, the best time to get an update class is in the Fall after Congress has had time to make changes. We're expecting some estate tax changes this year.

Jake (talk|edits) said:

17 May 2010
Seems to me that the IRS instructions addressed only Medicare Part B premiums.

I need to recheck but I did not think the SE med ins deduction turned on whether the premium was "subsidized" unless it was a subsidized employer plan. I have taken after tax medical premiums as se deduction where the insurance was covered by a state teachers plan - the employer was the school, not the state teachers retirement plan. One step further, when a person retires, even if the plan was from his former employer, that entity is no longer that person's "emplpoyer".

I always caution the client that this is an unclear situation.

Death&Taxes (talk|edits) said:

17 May 2010
Kevin, after living in upstate NY where seminars come in November, I often found late developments made them out of date. Now I always attend the last seminar in Atlantic City the first week of January, just before the educators close up shop and go back to work.

Kevinh5 (talk|edits) said:

17 May 2010
yes, writing texts and performing on stage before your most critical peers is pure pleasure. Actually doing the tax returns is work.

Kevinh5 (talk|edits) said:

17 May 2010
(tounge firmly in cheek)

R2 (talk|edits) said:

18 May 2010
The subsidized health plan rule applies to plans subsidized by the employer of the taxpayer or the employer of the spouse. I do not believe that Medicare, Part B is subsidized by the employer.

Arguably, Medicare, Part A is subsidized by the employer with the 1.45% tax.

Cotopop (talk|edits) said:

18 May 2010
Pub 535 (page 18 ) is not as broad as the 1040 Instructions regarding deductibility of medicare premiums as self-employed health insurance. Under the "TIP " comment it says Medicare Part B premiums are not considered medical insurance premiums for purposes of the self -employed health insurance. By inference this language would seem to open up the deduction for Medicare D prescription premiums paid to various providers as self- employed health insurance deduction

But wait there's more..... right after the TIP comment it says "Take the deduction on Form 1040 ,line 29 which just happens to be the self employed health insurance line.

It looks like IRS has really bothched up the instructions .

R2 (talk|edits) said:

18 May 2010
The real issue is whether the plan was established for the business. I believe that the Service has ruled that an employer can structure a plan for employees that reimburses Medicare Part B premiums. Why wouldn't the same treatment be available for self-employed individuals and S corporation shareholders?



NOTICE to readers:

This discussion has been locked, as the IRS's 2011 policy change, as reflected in the 2010 Form 1040 instructions and the March 2011 update to Pub 535, are being discussed many places elsewhere on this site (probably close to the bottom of the search results list, since that's where the discussions started most recently are shown). Attempting to post using the "reply" box below will result in a generic error message. Thank you.

Personal tools