I
am currently self-employed (as a sole proprietor) and my spouse works at a
non-profit. Right now we both get health insurance through her job. However, my
portion of the insurance costs are not subsidized, so adding me to her
insurance basically quadrupled the premium deducted from her paycheck.
Information is starting to filter out about the costs of the plans in the new health insurance exchanges will be next year, and it looks like moving from her insurance to the exchanges will reduce the premiums we pay by quite a bit. But I was wondering if I would be allowed to take my premiums as the above-the-line self-employed health insurance deduction, as I still am eligible to be on her insurance if I want to be. Some things I've found online says that you can't take the above the line deduction even if you're just *eligible* to be on a family member's plan, but I've also found a few notes (without much detail) saying that this changed in 2010 (maybe as part of the health care reforms?). If I can't take the premiums as an above-the-line deduction, can I take them as a deduction as a medical expense on Schedule A?
I'm also curious as to whether health insurance premiums deducted from your paycheck are subject to FICA tax. Even if I can deduct premiums above the line as a freelancer, that amount of freelance income would still be subject to self-employment tax, so to question of whether we'd pay FICA tax on the equivalent would help determine if it's really a better deal or not.
Information is starting to filter out about the costs of the plans in the new health insurance exchanges will be next year, and it looks like moving from her insurance to the exchanges will reduce the premiums we pay by quite a bit. But I was wondering if I would be allowed to take my premiums as the above-the-line self-employed health insurance deduction, as I still am eligible to be on her insurance if I want to be. Some things I've found online says that you can't take the above the line deduction even if you're just *eligible* to be on a family member's plan, but I've also found a few notes (without much detail) saying that this changed in 2010 (maybe as part of the health care reforms?). If I can't take the premiums as an above-the-line deduction, can I take them as a deduction as a medical expense on Schedule A?
I'm also curious as to whether health insurance premiums deducted from your paycheck are subject to FICA tax. Even if I can deduct premiums above the line as a freelancer, that amount of freelance income would still be subject to self-employment tax, so to question of whether we'd pay FICA tax on the equivalent would help determine if it's really a better deal or not.
Answer:
- You can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents. However, you cannot deduct any insurance costs for any months you were eligible to participate in a subsidized group health insurance plan through your or your spouse's employer. For example, if you paid for 12 months of health insurance coverage for yourself and your family, but you became eligible to participate in your spouse's group health insurance in December, then you can deduct only 11 months worth of insurance premiums. Self-employed persons were able to include their health insurance premiums as a deduction reducing both their self-employment tax and their income tax for the year 2010 only. Read more...
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