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10-03-2017 01:46 PM
My spouse and I are retired, both receiving pensions, both receiving a Health Insurance Benefit (HIB) from our former employer (same employer for both of us.) This is NOT an employer provided group insurance plan for retirees, nor is it managed by them in any way. We each receive up to $450/monthly that can be spent towards privately acquired health insurance. In our case, that means we're buying minimal coverage on our state's exchange and still paying out of pocket as the premium exceeds the HIB. With next year's reported 24% increase in our state, that expense becomes significant. We are not eligible for any credits.
Self employment comes in the form of a small consulting business I've run that has been active for about 15 years. Schedule C has always shown a profit, and it's a bit higher than our health insurance premiums. Absent the HIB provided by our former employer, I know I could deduct our health insurance premiums.
I've read here and elsewhere about health insurance premium deductions for sole proprietors, but they all state variations of the same thing - that participation in an employer's health plan by either spouse prevents the deduction. However, all the articles I've read specifically mention group insurance and/or employer maintained plans. None of them address the situation we find ourselves in - purchasing private insurance ourselves, and paying out of pocket for premium expenses beyond our HIB.
So, the question. Would our premiums be deductible in the above circumstance? All of it? None of it? Just the portion beyond what the HIB provides for? Any cites to IRS codes or decision letters would be welcome - I've looked, and can't find any.
10-07-2017 01:36 PM
Welcome to the H&R Block community.
This works kind of like a combination of the self-employment health insurance deduction and the premium tax credit. Anything that you paid out-of-pocket in excess of the HIB amount is eligible for the deduction. So if you paid $1,000 out-of-pocket above what you were provided then you should figure the self-employment deduction with that $1,000 figure.
Note that the insurance plan must be set up under the business or under your name if you're doing business in your own name. You can deduct the amount paid for your family (spouse & dependents) in addition to the cost of your own insurance if you're paying for it under your business plan.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)