NOL - health insurance costs

A sole proprietor gets to deduct half of his health insurance costs on the 1040 under Adjustments to Income. No problem there.

The IRS calls that deduction business related, so it does not qualify for the Schedule A net operating loss deductions.

When income on the Schedule C is minimal, and the adjustments to gross income (and also the standard deduction, but either one would do) creates an overall net loss, can that somehow be carried over into the next year and used?

And if so, how? I don't normally do returns, and I haven't been able to figure this one out.

Thanks.

Reply to
Stuart A. Bronstein
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First off the self-employed health insurance deduction is 100% not 50%. However, your business has to have a net profit to take the deduction. Any health insurance premiums not allowed as an adjustment to income can be taken on Schedule A of the 1040.

The starting point for whether or not you have an NOL is the amount on Line 41 of the 1040. This is the line that represents your AGI less your std or itemized deductions. If it is negative, you would need to go to Schedule A of Form 1045 to make the computation. This schedule is where you make adjustments to the Line 41 (1040) amount for nonbusiness capital gains/losses, nonbusiness income and nonbusiness deductions. As the health insurance deduction is business related, there is no adjustment on the Schedule A (1045) for that amount. In other words, any allowable deduction for heath insurance premiums of your business will be used to determine your NOL, if any.

Reply to
Alan

Point of order: If it were a business related deduction, it DOES qualify toward NOL treatment. Non-business deductions are the ones that don't contribute toward an NOL.

Note that a negative AGI (without capital losses) is also an indicator. ;-)

Reply to
D. Stussy

True, but if AGI is negative then Line 41 will be negative. Best to use Line 41 as that is the amount that gets posted to Line 1 of the 1045 Schedule A.

Reply to
Alan

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