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Self employed health insurance deduction for minister paying se tax on w2 compensation and has 3 other schedule C forms.

RANDYBLANK
Level 3

I'm only getting a small percentage of the health insurance deduction on line 29 apparently because the 1/2 se tax deduction is including the se tax calculated on the w2 wages and the housing allowance.  This doesn't seem right to me, i'm thinking that he should get 100% deduction as long as the health insurance does not exceed the 3 schedule Cs less 1/2 the se tax associated with them.  Am I thinking right?  Thanks in advance for any thoughts on this question.

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itonewbie
Level 15

Ministers are treated as employees in relation to income reported on the W-2, by virtue of meeting the common law employee factor tests, although the Code (and, therefore, the IRS) bifurcates on how minister wages are subject to SE-tax.

While it is possible for ministers to have self-employment income acting in capacities other than as being an employee of the church, for which W-2 is issued, they are employees with regard to wages reported on the W-2 and not "self-employed individuals" as defined under §401(c) and, consequently, not qualify for above-the-line SEHI deduction provided for under §162(l).

Medical insurance with respect to the minister's employment income should, instead, be deducted on Sch A.

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Still an AllStar

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TaxGuyBill
Level 14
According to the IRS Worksheet (and therefore the ProSeries worksheet called the "Self-Employed Health and Long-Term Care Insurance Deduction Worksheet"), it takes the TOTAL on Line 27 (1/2 SE tax) and then prorates it among the total income of all businesses.
https://www.irs.gov/pub/irs-pdf/p535.pdf#page=22

But the tricky part is Line 5 of that worksheet.  It does not specifically state to include the clergy wages.  However, I agree with you, that Line 5 SHOULD include the clergy wages, so if you are willing to 'take a stand', you should override Line 5 of that worksheet to add the clergy wages.
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RANDYBLANK
Level 3
It's very helpful that you agree with me.  Thanks for your input......
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itonewbie
Level 15

Ministers are treated as employees in relation to income reported on the W-2, by virtue of meeting the common law employee factor tests, although the Code (and, therefore, the IRS) bifurcates on how minister wages are subject to SE-tax.

While it is possible for ministers to have self-employment income acting in capacities other than as being an employee of the church, for which W-2 is issued, they are employees with regard to wages reported on the W-2 and not "self-employed individuals" as defined under §401(c) and, consequently, not qualify for above-the-line SEHI deduction provided for under §162(l).

Medical insurance with respect to the minister's employment income should, instead, be deducted on Sch A.

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Still an AllStar

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TaxGuyBill
Level 14
I *THINK* it sounds like the OP is trying to use the SEHI deduction against the 3 'other' Schedule C businesses, rather than the clergy W-2 income.

@RANDYBLANK   The Self Employed Health Insurance deduction is limited to the profit of THAT specific business that has the 'plan'.  So if you have 3 businesses that EACH have a $1000 profit and you enter $3000 health insurance under one business, the limit will be $1000.  In that example, each business would need to have a 'plan' that pays for $1000, and you would enter $1000 under each of the 3 businesses.
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itonewbie
Level 15
:+1::+1:
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Still an AllStar
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RANDYBLANK
Level 3
That is a correct assessment....  I accidently clicked on 'recommended answer'...  I can't figure out how to 'unclick' it.....  Thanks to everyone for their input...
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roniswindell
Level 3

You deduct the health insurance on Sch A, but can you also include the health insurance premiums as clergy business expenses on Sch SE to reduce SE tax?  My client has no Sch Cs, only W2 from church with no Social Security deducted.

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