Health Insurance Deduction For Self-Employed
There are many reasons why being self-employed isn’t for everyone, not the least being you’re responsible for buying your own health insurance. You can however, take a deduction from your taxable income on your 2019 tax return for health insurance premiums paid.
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NO COVERAGE ELSEWHERE
You need to meet two major requirements to qualify for this tax break. First, you and your spouse cannot be eligible for an employer-sponsored health insurance benefit. Second, you must have enough business income to qualify. You can take a partial deduction if you don’t have enough. For example, you can only deduct $10,000 of a $15,000 health insurance policy if your income was $10,000. If your income is greater than the cost of insurance, deduct the entire premium.
ITEMIZE OR NOT
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Unlike so many other deductions that disappeared after the Tax Cut and Jobs Act of 2017 became law, you don’t have to itemize this on your tax return, meaning you may want to also take the standard deduction if you only have a few other deductions.
The health insurance deduction, unlike many others, is considered “above the line,” meaning it is deducted from your gross income and lowers your eventual adjusted gross income. The latter category often determines your availability for other tax breaks, including deductible IRAs.
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