Self employed health insurance deduction

[billr617]

Hi. Client MFJ both  retired and collecting SS and paying medicare. Husband is  self employed carpenter. He has government pension. Continued his health insurance in retirement. Premiums deducted post tax from monthly pension.  I know I can deduct medicare premiums for both  he and his wife from the SE income (to the extent of profit) but other health premiums seems to be "grey". Law says can't deduct employer subsidized premiums, but he has no employer. Also would think the reason for that would be that employee premiums are already pre-tax.  Any one have any ideas/ opinions about deducting his monthly premiums as a retiree? Thanks!

[Just-Lisa-Now-]

SEHI rules are pretty clear that the policy needs to be in the name of the business or the name of the self employed person, a government pension health insurance is neither of those.

[billr617]

Hi Lisa,

   Thank you for the reply. The policy is in the persons name -same group  coverage as when working and offered in retirement - just has to pay higher premiums that are not pre tax. Seems to be just like medicare  premium which can be deducted against the self employment  income or am I not understanding the deduction rules or are they different for medicare. Thanks!

[Just-Lisa-Now-]

Its through a group plan with his ex-employer, its not in his name or the name of his self employed business.

Medicare premiums are based on that individual person's income, I think that's why were allowed to include those as SEHI.

[BobKamman]

What would you do with this?

Wife is self-employed.  Husband is retired and pays Medicare B ($1,979).  He's retired military so qualifies for Tri-Care.  So does she, but must pay an annual "enrollment fee" of about $600.  

[Skylane]

@billr617    Not Deductible 

[qbteachmt]

"The policy is in the persons name -same group  coverage"

Let's not confused "person covered" and "policy in the name of."

Group coverage means employer plan. Unless you know he is paying a full premium (which is unusual; nearly all group plans are a subsidized cost), it doesn't qualify. Having an additional cost to add a spouse means the spouse is eligible, even if not enrolled. So that person also not qualified for the SEHI deduction.

"Medicare premiums are based on that individual person's income, I think that's why were allowed to include those as SEHI."

No, it's because of how being covered by Medicare is handled. If you are Self-Employed and under Medicare or qualify, you don't have any option to get an employer plan or make that a family plan, so the intent to establish the plan under the business is not possible. This is a parity provision.

"“Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer can’t be used to figure the deduction.”"

There is a recent topic with a good discussion here:

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/self-employed-health-i...

[billr617]

Thank you for the response. Could one make the argument that the "subsidized" premiums  the IRS refers to were those that were actually reimbursed by a third party and not paid in full? 

As opposed to employer "sponsored" plans .Say for example premiums paid in a year of $5,000 but $1,200 reimbursed for joining a health club thus only $3,800 deductible? Similar to the PSO $3,000 deduction? 

Definition from healthcare.gov

Subsidized coverage

Health coverage available at reduced or no cost for people with incomes below certain levels.

Examples of subsidized coverage include Medicaid and the Children’s Health Insurance Program (CHIP). Marketplace insurance plans with premium tax credits are sometimes known as subsidized coverage too.

• In states that have expanded Medicaid coverage, your household income must be below 138% of the federal poverty level (FPL) to qualify.
• In all states, your household income must be between 100% and 400% FPL to qualify for a premium tax credit that can lower your insurance costs.
• If your income is at or below 150% FPL, you may qualify to enroll in or change Marketplace coverage through a Special Enrollment Period.
• If your income is above 400% FPL, you may still qualify for savings on a 2022 Marketplace health insurance plan.
•  

From form 7206

Other coverage.

You can’t take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you didn’t actually participate. 

Just a thought!

[qbteachmt]

"As opposed to employer "sponsored" plans ."

There is no "opposed to" in the SEHI. The word "subsidized" is applicable to more than one thing. ACA/State marketplace plans (which by definition are not employer group plans) are using the word differently than the SEHI requirement that it not be an employer-subsidized plan.

Here is an example that I think helps: Employer A does not offer health care coverage. They do have a reimbursement policy for the employees who get an ACA/marketplace policy. Other employees might have coverage through their spouse's employer B as a family plan. So, if your taxpayer is married to an employee of A, there i no employer plan on offer ("subsidized" is moot, there is not even a plan). If your taxpayer is married to an employee of B, there is a family plan available (group plans are typically subsidized). And I was remembering historically, a lot of this came about in regards to COBRA coverage, which was an unsubsidized policy price, typically, but was through the employer.

Check this link:

https://turbotax.intuit.com/tax-tips/health-care/what-is-employer-sponsored-coverage/L01gcZpTR

[billr617]

Thank you for the input qbteachmt.  I came across that link earlier- hence my question as that link is for employer "sponsored" plans as opposed to employer "subsidized" plans. 

Maybe semantics (sponsored versus subsidized) but as with many things IRS related -not exactly clear.

Thank you all for informed responses.

[qbteachmt]

Who is 7890? What happened to the username?