What's new for the Self-employed health insurance deduction for tax year 2023:
Starting in tax year 2023 the IRS has released Form 7206 to calculate the Self-employed health insurance deduction for the 1040. In tax years 2022 and prior, the IRS used the Self-employed health insurance deduction worksheet from the 1040 instruction booklet to calculate the allowable deduction on the 1040.
If the Self-employed health insurance premiums are for a more than 2% shareholder in an S-Corporation, see here.
To generate a SE health insurance deduction starting in tax year 2023:
- Go to Screen 24, Adjustments to Income.
- From the Sections select SE Health Insurance (7206).
- Enter the Premiums not entered elsewhere (excluding long-term care) (taxpayer code 16, spouse code 66).
- Under the Long-term Care Premiums subsection, enter any applicable amounts in the corresponding fields.
- Premiums paid for self-employed person (taxpayer code 26, spouse code 76)
- Premiums paid by the taxpayer (code 34)
- Premiums paid by the spouse for the taxpayer (code 84)
- Complete the Form and Activity Name or Number subsection.
- To make adjustments to the deduction use the Net Earning Adjustments subsection.
- The override for SE Health Insurance Deduction is no longer available.
- Lacerte limits this health insurance deduction to the lesser of the total premiums entered, or the net earnings from self-employment minus qualified retirement plans and one-half of the self-employment deduction on Form 1040.
- To limit the deduction based on the net income of a single business activity, you must indicate the form and activity name or number.
- Lacerte carries the limited amount to Form 1040 and carries the total premium entered (less the limited amount) to Schedule A as a medical expense.
- Lacerte doesn't limit the deduction when Form 2555 or Form 4563 is needed. When income is excluded from sources within Puerto Rico, or when the taxpayer claims a net operating loss deduction; if any of these situations apply, use the adjustment fields.
- Lacerte doesn't calculate the deduction when the taxpayer has net earnings and gains (other than capital gains) from the disposition, transfer, or licensing of property. You must manually adjust the calculation with the adjust fields.
For Self-employed minsters that received a W-2 that needs to have the SE health insurance computation include the income from the W-2 and other scenarios:
- Go to Screen 24, Adjustments to Income.
- Select the SE Health Insurance (7206) section.
- Find the Net profit of business under which plan is established [A] field.
- Enter the amount of SE income associated with the SE health insurance.
