Where Do We Deduct Our Health Insurance Premiums?!
One of our readers asked the following question:
“Self employed health insurance deductions: does is apply to schedule F, schedule 1040 or both? Will I be able to deduct my health insurance on both my 1040 AND my schedule F or will I have an option of either schedule, or is it schedule F only for 2010.”
The Small Business Jobs Act of 2010 added a new provision for 2010 allowing the cost of health insurance premiums for farmers and other self-employed persons to be deducted against self-employment tax. However,the Act did not change how the health insurance premiums are deducted for regular income tax purposes. I have reviewed the instructions for Schedule F and they state that these health insurance premiums are still deducted on page 1 of form 1040 on line 29.
However, I have not seen the new schedule SE which is where I believe the actual deduction on line 29 of form 1040 will flow through as a deduction to offset your SE tax.
Therefore, to answer the question, the actual health insurance premium allowed as deduction will be recorded on line 29 of form 1040, but not on schedule F or C, etc. Any allowed deduction should then flow to the schedule SE to be allowed as a deduction against SE tax. You will only report the deduction once against actual taxable income. You will not be allowed to claim the premiums twice as a deduction and they do not go on Schedule F.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
I’ve just run across an interesting hypothetical situation. If a person is a more than 2% S-corp owner, gets a W-2 from the S-corp with SE Health insurance added back in box 1. This same person also has a Sch C or F. So far, Ultratax is taking the insurance as an above the line deduction as well as a reduction in the SE tax calculation. However, I haven’t seen anything saying if this is the correct treatment. But then, it may just be an unintended consequence of the law and an unusual situation.