Discussion:Self Employed Health Insurance Deduction

I'm hung up on Sec 162 "Paragraph (1) 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."

My client (sole prop) pays for his health insurance separately and his spouse pays for hers through her employer. The word SUBSIDIZED has me confused (it's late). Am I to take it that SUBSIDIZED would mean insurance that is paid for in whole by the spouse's employer, she contributes nothing. Or, any insurance that the employer provides in whole or in part where she contributes something towards it?

I guess where I might be going with this is wieghing the cost of both separate insurances versus the cost of the spouse's insurance were she to include her husband on the policy and have her monthly premiums increase according. It might be a case where two separate insurances are cheaper than one 'joint' insurance. Something akin to the now defunct Marriage Penalty.

Again it's late. As usual, my mind is thinking in ways that my words don't always convey well.

1. a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like. 2. a sum paid, often in accordance with a treaty, by one government to another to secure some service in return. 3. a grant or contribution of money. 4. money formerly granted by the English Parliament to the crown for special needs.

I think it would mean in whole or in part, but you should wait for others to respond.

Sec. 162 provides that you are not eligible for SE Health deduction if you are eligible for any SUBSIDIZED plan through an employer.

Here's the situation. TP is self-employed. TP's spouse works for an employer and participates in employer's group health plan. Employer pays 75% of her premiums. She can enroll her self-employed husband and children in the group plan but she will have to pay 100% of their premiums.

Question: Because she needs to pay 100% premiums for the family does it mean that it's not SUBSIDIZED and her husband can deduct SE Health Insurance premiums for him and his kids if he chooses to purchase HI somewhere else?

At the same time they can purchase a high-deductible plan for $300 per month. They are pretty healthy so it would work for them.

My question is:

Can she have insurance through her employer (her portion of the premiums will be pre-tax) and at the same time can her self-employed husband buy insurance for him and kids and DEDUCT the premiums under SE Health insurance deduction?

We can't deduct it a second time using SE health insurance deduction, can we?

TexCPA 16:59, 14 March 2009 (CDT)

Illini, in my situation the spouse chooses not to enroll her husband in the employers plan, even though they are eligible.

TexCPA, I read the Sec. that your are referring to. My question was regarding what is the meaning of the term SUBSIDIZED under this sec.

Although I am not an attorney: 'SUBSIDIZED' support from a source that is not from your own wallet, see 'SUBSIDY' "Financial assistance given by one person or government to another",

There are all kinds of private and governmental 'SUBSIDIES' or as I refer to them 'ENTITLEMENTS'Farm subsidies, bank subsidies, auto industry subsidies, social security subsidies, health care subsidies ..

I think you get the drift..

TexCPA 22:18, 14 March 2009 (CDT)

A more difficult question - spouse gets a basic level of LTC insurance for free -paid for my employer (e.g., $50 a day coverage). The spouse can buy a higher level, e.g. $150 a day, but that add on is not subsidized.

In regard to buying the insurance from the working spouse's employer on a pretax basis, that is a better deal than paying for it after tax and taking the SE deduction because that also saves FICA tax. I did that for several years - wife will always do better taking 50% of my soc. sec. so any soc. sec. tax she pays is essentially wasted.