Healthcare Tax Saving Tips to Remember

Sole proprietors, partners, limited liability company (LLC) members, and S corporation shareholders can deduct qualified health insurance premiums paid to cover themselves and family members. This is the so-called self-employed health insurance deduction.

For 2010, you claim it on Line 29 on Page 1 of Form 1040. Because it’s an above-the-line deduction (meaning a deduction claimed on Page 1), you don’t have to itemize to benefit.

Medicare Part B Premiums Suddenly Count as Qualified Expenses

For years, the IRS had taken the position that Medicare Part B premiums did not count as qualified health insurance premiums. This was bad news if you are an older small business owner because your Medicare Part B premiums for 2010 could range from about $1,300 to over $4,200, depending on your income. If you are married, your spouse’s premiums could be in the same range. So we can be talking about major bucks.

Now for the good news:  The IRS reversed course on the Medicare Part B premium issue. We know this because the 2010 instructions for Line 29 of Form 1040 specifically allow you to include Medicare Part B premiums in your health insurance costs for purposes of the self-employed health insurance deduction.

Make sure you (or your tax preparer) take these worthwhile deductions into account when putting together your 2010 return. The additional Line 29 write-off could lower your federal income tax liability saving you hundreds.

It’s a Double Tax-Saver!

As a bonus, you can subtract your self-employed health insurance premiums (the amount claimed on Line 29 of Form 1040) from self-employment income when calculating your 2010 self-employment tax bill. So the additional Line 29 deduction for Medicare Part B premiums could lower your self-employment tax bill by a significant amount as well as your federal income tax bill. It’s a tax deduction that’s twice as nice.

 

About Hickey&Hickey

Hickey & Hickey is not just a Tax, Accounting & Payroll firm we are here to help people become Financially Healthy. Apart from offering financial information online we conduct Seminars geared to individuals and small businesses. Hickey & Hickey no solo prepara taxes, nomina y contauria estamos aqui para ayudarle a mantener su salud economica. Fuera de traerle informacion por internet ofrecemos seminarios al publico, para individuales y empresas.
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