Self-Employed Deduction for Health Insurance Premiums

If you are self-employed and have a health plan through your business, you may be able to deduct your premiums. An eligible self-employed person would be filing a schedule C with a profit, have earnings from self-employment in a partnership, or be at least a 2% owner of an S-corp and have wages on a W-2. The premiums may be for yourself and your family, but must be through your business.

Before 2003, your premiums will be divided and deductible in two different places. A portion would be deductible as the Self-Employed Health Insurance Deduction on line 28 of Form 1040, an adjustment to your income. For 2001 the amount is 60%; for 2002 it is 70%. The remainder would be added to any other deductible medical expenses you may be deducting on Schedule A. Whether you end up benefiting from this portion of the premiums depends on whether your total medical expenses are more than 7.5% of you AGI.

After 2002 the deductible percentage for the Self-Employed Health Insurance Deduction becomes 100%, so there is no longer a need to split or deduct the premium in two different places.

For more details on eligibility or on the rules concerning long term care insurance, see the link to the right for IRS Pub 535.