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Premiums for self-employed health insurance

Forum|Forum|3 years ago
February 23, 2023
2 replies
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As I understand the IRS code, the total of:

50% of Social Security

Solo-401K contributions

Health insurance premiums.

Cannot exceed the profit from the business, for that year.

Pease clarify, when I run TurboTax, that limit is not applied on the

"Adjustments to Income".

TurboTax Home & Biz Windows

Best answer by DavidD66

You are correct. If you are self-employed, you must have a net profit from your business in order to take the self-employed health insurance deduction. Similarly, your contribution to a business retirement plan (e.g. Solo 401(k) or SEP IRA) is limited by your profit from business. Also, if you don't have any profit, you won't pay any self-employment tax, so you won't have a deduction for 50% of your self-employment tax. If you have a Solo 401(k), and take a deduction for health insurance, the combined amount of those two items cannot exceed the amount of your business profit.

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Cynthiad66

There's no dollar limit for the deduction, but it is limited to your net profit from self-employment. In other words, if your business doesn't earn a profit, you can't take the deduction.

Adjustment to Income happens when you enter as follows:

To enter the insurance premiums, you will do as follows:

Go to the Business category.
Go to the Business Income and Expense subcategory.
Choose the option "I'll choose what I work on"
On the screen labeled "Let's gather your business info", find the section labeled "Less Common Business Situations".
Click start or update next to the line labeled Self-employed Health Insurance.

Self-Employed Health Insurance

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G

Garry_NewEnglandAuthor

Other websites indicate that the SUM TOTAL of "401K+50% of SS + health premiums" cannot exceed

profits from the business.

A topic which needs to be resolved, I believe, as some authorities on this deduction report

that limit.

VolvoGirl

I don't understand what 401K and Social Security have to do with it at all.

If your health ins exceeds your net self-employment income it gets split. An amount equal to your net self-employment income goes on Form 1040 Schedule 1 line 17 (to 1040 line 10) and the remainder gets added in to medical expenses on Schedule A.

For Social Security.....

Medicare plan B payments are qualified as Self-employed medical insurance premiums and should be entered under Business instead of in the Social Security Benefits entry area. So go back and take it off your SSA-1099 entry.

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Garry_NewEnglandAuthor

As a self-employed person, I do enter those premium as part of business expenses.

(Also, I use the standard deduction, so I do not file Schedule A).

The main issue, that I can research further, is that on Schedule 1 (Adjustments to Income),

it is my understanding that business profit limits the sum of those 3 deductions.

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DavidD66Answer

You are correct. If you are self-employed, you must have a net profit from your business in order to take the self-employed health insurance deduction. Similarly, your contribution to a business retirement plan (e.g. Solo 401(k) or SEP IRA) is limited by your profit from business. Also, if you don't have any profit, you won't pay any self-employment tax, so you won't have a deduction for 50% of your self-employment tax. If you have a Solo 401(k), and take a deduction for health insurance, the combined amount of those two items cannot exceed the amount of your business profit.

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