Medicare Part B premiums for self-employed persons

As long as her business has a "plan" to pay or reimburse all medical insurance for the family, it goes on line 29 (subject to the limitation that it cannot exceed her Schedule C income).

If it does exceed her net Schedule C income, you split it. The amount up to the net Schedule C income goes on line 29, and the remainder of the premiums goes on Schedule A.

Bob Sandler

What does such a "plan" require? A written document signed before a notary public? Or just a general expression of intention to do so by my spouse? And if such a plan or intent says that all medical insurance for the _family_ (including dependents of which there are none in this case) will be reimbursed, can *my* Medicare premiums also go on Line 29, not just my spouse's premiums? Insurance premiums for supplemental health insurance that are withheld from my pension (and I am not a retired public safety official) on the grounds that she is reimbursing me for the premiums? (Her self-employment earnings are more than any amount that could be included on Line 29 and so that is not an issue; thanks to Bob Sandler too for reminding me about this).

Thanks for any clarifications.

Dilip Sarwate

According to a 2005 IRS Memorandum:

A sole proprietor who purchases health insurance in his or her individual name has established a plan providing medical care coverage with respect to his or her trade or business, and therefore may deduct the medical care insurance costs for himself, his spouse and dependents under I.R.C. ' 162(l) but only to the extent that the cost of the insurance does not exceed the earned income (as defined in I.R.C. '

401(c)) derived by the sole proprietor from the specific trade or business with respect to which the insurance was purchased;

In other words.... there is no requirement other than you buy the insurance.

As I understand it, until the 2010 tax year, IRS did not allow self-employed persons to deduct *Medicare* premiums as health insurance costs on the grounds that the self-employed person had not *bought* Medicare insurance, but in early 2011, IRS quietly reversed this position and allowed Medicare premiums to be deducted on Line 29 of Form 1040 beginning with 2010 returns. See, for example,

The instructions for Line 29now say that

"Medicare premiums you voluntarily pay to obtain insurance that is similar to private health insurance can be used to figure the deduction."

So,since my wife's Schedule C income is larger than the Medicare premiums she paid, she can deduct her premiums on Line 29. My question is: can she be said to have paid *my* Medicare premiums on my behalf as well, or re-imbursed me for my Medicare premiums as health insurance for family members of self-employed persons; and so *my* Medicare premiums are also deductible on Line 29? (All payments were made out of joint accounts if that makes any difference). And does this require any kind of written policy or just a statement like "Honey, you know what? I will pay for your Medicare premiums out of my Schedule C earnings."? A similar question arises for premiums for health insurance coverage (secondary to Medicare) that *my* pension plan (NOT my employer) provides for my wife which *I* pay, and which does not quite seem to fit the description of "insurance that the self-employed person has bought."

Thanks for the help

Dilip Sarwate

As I understand it, until the 2010 tax year, IRS did not allow self-employed persons to deduct *Medicare* premiums as health insurance costs on the grounds that the self-employed person had not *bought* Medicare insurance, but in early 2011, IRS quietly reversed this position and allowed Medicare premiums to be deducted on Line 29 of Form 1040 beginning with 2010 returns. See, for example,

The instructions for Line 29now say that

"Medicare premiums you voluntarily pay to obtain insurance that is similar to private health insurance can be used to figure the deduction."

So,since my wife's Schedule C income is larger than the Medicare premiums she paid, she can deduct her premiums on Line 29. My question is: can she be said to have paid *my* Medicare premiums on my behalf as well, or re-imbursed me for my Medicare premiums as health insurance for family members of self-employed persons; and so *my* Medicare premiums are also deductible on Line 29? (All payments were made out of joint accounts if that makes any difference). And does this require any kind of written policy or just a statement like "Honey, you know what? I will pay for your Medicare premiums out of my Schedule C earnings."? A similar question arises for premiums for health insurance coverage (secondary to Medicare) that *my* pension plan (NOT my employer) provides for my wife which *I* pay, and which does not quite seem to fit the description of "insurance that the self-employed person has bought."

Thanks for the help

Dilip Sarwate

YES - if you are employed by her in her business, are paid a reasonable salary and get a W-2.

Gene E. Utterback, EA, RFC, ABA

First I conclude that Medicare Parts A, B, C & D are all voluntary health insurance plans as no one is forcing you to be covered by medicare. Second, I conclude that because it is voluntary health insurance, you can deduct it on Line 29 to the extent that your business has net earnings. Third, I conclude that as you can deduct health insurance premiums you pay for yourself, spouse and dependents any premiums paid to cover your spouse could be included on Line 29. This is no different then an employer reimbursing an employee who paid the premiums rather than the employer buying the policy directly. Reimbursing your spouse should be considered the same.

On the same topic, Section 162(I)(2)(B) provides

Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer or of the spouse of, or any dependent, or individual described in subparagraph (D) of paragraph (1) with respect to, the taxpayer.

Is a FORMER employer (e.g. one who provides a health plan as a retirement benefit) considered as an employer for this restriction?

Don EA in Upstate NY

And how does paying for COBRA continuation coverage fit in to all this?

Does your newreader not have settings to indent the original with >

I don't think it is necessary for the person to be employed by his wife in order for his wife to be able to deduct the premiums she paid for his health insurance as part of her business.

On Feb 17, 7:57 am, Don Priebe wrote:

could have covered medicare part B premiums, then he can't take the deduction for premiums paid by him and his wife on line 29. The key is the "The preceding sentence shall be applied separately with respect to ..." below.

BEGIN QUOTE

(l) Special rules for health insurance costs of self-employed individuals (1) Allowance of deduction In the case of a taxpayer who is an employee within the meaning of section 401 (c)(1), there shall be allowed as a deduction under this section an amount equal to the amount paid during the taxable year for insurance which constitutes medical care for? (A) the taxpayer, (B) the taxpayer?s spouse, (C) the taxpayer?s dependents, and (D) any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. (2) Limitations (A) Dollar amount No deduction shall be allowed under paragraph (1) to the extent that the amount of such deduction exceeds the taxpayer?s earned income (within the meaning of section 401 (c)) derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established. (B) Other coverage Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer or of the spouse of, or any dependent, or individual described in subparagraph (D) of paragraph (1) with respect to, the taxpayer. The preceding sentence shall be applied separately with respect to? (i) plans which include coverage for qualified long-term care services (as defined in section 7702B (c)) or are qualified long-term care insurance contracts (as defined in section 7702B (b)), and (ii) plans which do not include such coverage and are not such contracts. (C) Long-term care premiums In the case of a qualified long-term care insurance contract (as defined in section 7702B (b)), only eligible long-term care premiums (as defined in section 213 (d)(10)) shall be taken into account under paragraph (1). h do not include such coverage and are not such contracts.

END QUOTE

I recently upgraded to a new computer with Windows 7 on it. Now I've forced to use Windows Live instead of Outlook as my newsreader. It is KILLING ME. I cannot figure out HOW to make it indent and quote. And there are other things, like I cannot figure out HOW to "jump to next unread" either. My apologies to moderator and the group. If anyone can tell me how to make it do this I'd be most appreciative.

Think what you like, the code is clear and you are incorrect.

Schedule C sole proprietors can deduct ON Schedule C the cost of health insurance and out of pocket costs PAID TO EMPLOYEES. If the spouse is an employee, who just happens to cover the sole proprietor as a dependent, and the EMPLOYER plan covers reimbursement for health insurance and medical costs then those costs get deducted on the face of the Schedule C and NOT as a miscellaneous itemized deduction subject to the floor on Schedule A.

Gene E. Utterback, EA, RFC, ABA

I'm talking about the deduction on page 1 of the 1040, line 29 as mentioned in the first post of this thread. That covers the taxpayer who owns the Schedule C, and even her spouse and kids. You're talking about deducting expenses for normal employees, which does happen on Schedule C, although I think line 29 is the proper place to put it even if your spouse is an employee in your Schedule C company.

messagenews: snipped-for-privacy@b23g2000yqn.googlegroups.com...

I was asking about the deduction on Line 29 of Form 1040, which is for the proprietor, spouse, and dependents' health care costs, not about deductions on Schedule C for employee health-care costs. I know and agree with you that since I am not employed in my wife's business and don't receive wages from her business, my wife (the Schedule C sole proprietor) is not allowed to deduct my health care costs on Schedule C. She is entitled to deduct

*her* Medicare premiums on Line 29, Form 1040; self- employed persons were not so entitled prior to 2010. I was asking about *my* Medicare premiums specifically: are they deductible on Line 29, Form 1040? and I believe the answer is Yes.

There are various rules, some quoted in this thread, about exceptions based on health-care coverage from other

*employment.* My wife and I have health insurance (secondary to Medicare) that is provided as a benefit by *my* pension plan, which is a different entity than my former employer. There is no charge for my coverage but I pay for her coverage with post-tax dollars. When I was employed, I paid for her coverage with pre-tax dollars. The current coverage is *not* provided by my former employer but by my pension plan. In fact, I did do some part-time work for my former employer during 2011 and received W-2 wages, but I was *not* eligible to participate in the employer's health-care insurance plan (which is restricted to full-time employees). Health insurance coverage continued to be through my pension plan benefits during this time. So another question I had was whether these insurance premiums can be deducted on Line 29 of Form 1040. With regard to this question, Don Priebe has raised the issue of whether the former employer can be said to be the employer providing the benefits of the pension plan in the interpretation of these rules, and Rich Carreiro has raised the issue of COBRA premiums, which would also be things that might interest readers of this newsgroup.

Any thoughts you would care to share regarding Line 29 of Form 1040 would be greatly appreciated.

Dilip Sarwate

Just to clarify, my pension plan does not pay for Medicare premiums, and the health insurance plan it provides is secondary to Medicare.

Dilip Sarwate

snipped a lot

I'm talking about the deduction on page 1 of the 1040, line 29 as mentioned in the first post of this thread. That covers the taxpayer who owns the Schedule C, and even her spouse and kids. You're talking about deducting expenses for normal employees, which does happen on Schedule C, although I think line 29 is the proper place to put it even if your spouse is an employee in your Schedule C company.

Snipped a lot

Gene:

I was asking about the deduction on Line 29 of Form 1040, which is for the proprietor, spouse, and dependents' health care costs, not about deductions on Schedule C for employee health-care costs. I know and agree with you that since I am not employed in my wife's business and don't receive wages from her business, my wife (the Schedule C sole proprietor) is not allowed to deduct my health care costs on Schedule C. She is entitled to deduct

*her* Medicare premiums on Line 29, Form 1040; self- employed persons were not so entitled prior to 2010. I was asking about *my* Medicare premiums specifically: are they deductible on Line 29, Form 1040? and I believe the answer is Yes.

There are various rules, some quoted in this thread, about exceptions based on health-care coverage from other

*employment.* My wife and I have health insurance (secondary to Medicare) that is provided as a benefit by *my* pension plan, which is a different entity than my former employer. There is no charge for my coverage but I pay for her coverage with post-tax dollars. When I was employed, I paid for her coverage with pre-tax dollars. The current coverage is *not* provided by my former employer but by my pension plan. In fact, I did do some part-time work for my former employer during 2011 and received W-2 wages, but I was *not* eligible to participate in the employer's health-care insurance plan (which is restricted to full-time employees). Health insurance coverage continued to be through my pension plan benefits during this time. So another question I had was whether these insurance premiums can be deducted on Line 29 of Form 1040. With regard to this question, Don Priebe has raised the issue of whether the former employer can be said to be the employer providing the benefits of the pension plan in the interpretation of these rules, and Rich Carreiro has raised the issue of COBRA premiums, which would also be things that might interest readers of this newsgroup.

Any thoughts you would care to share regarding Line 29 of Form 1040 would be greatly appreciated.

Dilip Sarwate

Well, sure, not this year. But in 2010 it did :^)