Question

Calculation of self-employed health insurance deduction with long-term care premiums

Forum|Forum|3 years ago
February 27, 2023
1 reply
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I paid long-term care insurance premiums in addition to health insurance premiums for which I received some advance premium payments. Turbo Tax is calculating a self-employed health insurance deduction that exceeds my net self-employment income. This cannot be correct. Has anybody encountered this situation and a solution?

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RobertB4444

It is certainly possible that your self employed health insurance deduction could exceed your self employment income. However, the amount of the deduction that you are allowed to take on the return is limited by your self-employment income.

Your self-employed health insurance deduction should equal what you actually paid. That means the LTC payments that you made plus your out of pocket costs for the marketplace insurance (be sure to reconcile it on your tax return and deduct any repayment you receive or add any money that you have to pay in). Once you've calculated the full amount then enter it into TurboTax and the system will calculate the allowable deduction based on your income.

[Edited 03/13/23 : 10:38 AM]

@Grb2

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Grb2Author

According to the instruction for Form 1040, Schedule 1, line 17, you can take the self-employed health insurance deduction if "you were self-employed and had a net profit for the year reported on Schedule C or F". So I don't believe that people who lose money at their business can take the self-employed health insurance deduction. Additionally, the self-employed health insurance deduction worksheet that is included in the instructions limits the deduction to the smaller of the amount paid for the premiums or the net profit from the business. So you would not be able to deduct more than your net profit from the business. If you have any excess it could potentially be deducted on Schedule A as a medical expense.

JohnB5677

Everything you've said is correct.

I posted a scenario with $6,000 self-employment profit and $7,000 Medical premiums.

Those raw numbers didn't change on my input screen, and I didn't get a warning.
The result on line 17 of Schedule 1 was $5,576.
TurboTax also adjusted for the $424 Deductible part of self-employment tax.

To see what you have posted:

On the menu bar on the left that shows.
1. My Info
2. Federal
3. State
4. Review
5. File
Select Tax Tools
On the drop-down select Tools
On the popup menu
Select View Tax Summary
On the left sidebar
Select Preview my 1040.