Health Insurance Deduction
The Health Insurance Deduction for Self Employed needs to be taken care of
Do you fall in the category of the self-employed? If you have income from a company in which you are a share holder of more than 2%, then you too qualify. If either of these are the situations then make sure that you don’t miss the ‘above the line’ health insurance payment deductions. These are not your regular medical section deductions on your tax return. This is the section available on the front page that you need to fill out.
Following three reasons are what make the above the line deduction so important:
1. If you don’t qualify the itemizing deduction, even then you get your deductions.
2. The itemized deduction is equal to 7.5% of the Adjusted Gross Income (AGI). Taking this on the first page will qualify you for claiming all of it.
3. AGI is lowered by the health insurance deduction which is used at a number of other calculations as well, so the lower the figure, the better.
For all of this some calculations are required that can be easily performed through an online tax filing software. Still these are the steps that you can use manually:
• Check the positive net self-employment income. If the business is in loss then it’s your hard luck with the claim. Check typically the Schedule C and W-2 (for the 2% more shareholders).
• After all this checking you need to subtract 50% for the self-employed taxes. This too needs to be done on the above the line section and not in the regular medical section.
• If you make any contributions to SIMPLE-IRA, SEP-IRA or the Keogh plan, you need to subtract those too.
The amount that you are going to get after these steps is the allowable deduction ceiling for you. This is the amount that you can deduct for your medical insurance and that of your dependants. However, you can do this for the time period in which you are eligible for group health insurance plan
The easiest to get all of this done, is through the online software which does all the complicated calculations for you. One should not ignore all that hard earned money and leave it ignored for no good reason.