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Learning, Sharing, and Teaching => Investor Alley => Topic started by: meteor on January 16, 2015, 07:00:49 PM

Title: Sole Proprietor Health Insurance Tax Deduction Question
Post by: meteor on January 16, 2015, 07:00:49 PM
Several years ago I remember that I could only deduct my health insurance on Schedule C, then when Obama was elected they changed it so that is a deduction on the front of the 1040, which was supposted to be a big benefit.  But I don't understand why.  It seems the same.  For example:

Old days
If Schedule C shows 25,000 profit and I deduct 5,000 Health Insurance as a business expense, this = $20,000 taxable income that is moved to the front of the 1040.

Now
If schedule C shows 25,000 profit (no insurance deducted on schedule C) and it is moved to the front of the 1040 and then afterwards the $5,000 is deducted.  It still = 20,000 that is being taxed.

They seem the same to me.  What am I missing?

I'm trying to figure out how much money I save on taxes because of my HMO Health insurance (just curious).  The real numbers are $25,000 business profit and $9,000 annual insurance.
Title: Re: Sole Proprietor Health Insurance Tax Deduction Question
Post by: DavidAnnArbor on January 20, 2015, 10:05:20 PM
In reviewing my 2007 tax return versus the 2013 tax return the health insurance deduction still remains to the front of the 1040 and was not deducted from Schedule C business income.
There is a line on Schedule C that enables you to deduct insurance costs but it specifically states not to include health insurance here. There is another line on Schedule C to deduct employee benefit expenses.
Title: Re: Sole Proprietor Health Insurance Tax Deduction Question
Post by: johnny847 on January 21, 2015, 06:14:23 AM
So I think this may apply to you? http://thefinancebuff.com/irs-guidance-on-circular-reference-in-obamacare-premium-subsidy-and-deduction.html (http://thefinancebuff.com/irs-guidance-on-circular-reference-in-obamacare-premium-subsidy-and-deduction.html)
Title: Re: Sole Proprietor Health Insurance Tax Deduction Question
Post by: DavidAnnArbor on January 23, 2015, 09:26:03 PM
Thank you Johnny that's a great article.  So far I don't qualify for a deduction but I might if I am able to deduct enough income using a Solo 401k for the following year.