While nationalized healthcare continues to be this young decade’s political event, there are still those of us who, whether self-employed or who work for businesses that don’t offer healthcare, pay for our own healthcare. Here’s some tax tips for we brave souls on the frontier of the healthcare debate.
Self-employed Health Insurance Tax Deductability
According to about.com,, prior to claiming this deduction, you must first “calculate your allowable health insurance deduction. Take your self-employment income, and subtract the 50% deduction for self-employment taxes, and subtract any retirement contributions you make to SEP-IRA, SIMPLE-IRA, or Keogh plan. The remainder is your allowable deduction for health insurance expenses.”
The Tax Deduction that Pays Off
On to the deduction! First, and most important: you can deduct the full cost of health insurance you pay for yourself, your spouse, and/or your dependents. If you’re not, go over your taxes right now. You claim your health insurance deduction as an “above the line” deduction on Form 1040, line 29. Feel free to use your worksheet on this one.
But Don’t Go Over Your Maximum Tax Deduction!
Remember, however, you can’t deduct insurance costs any time you were eligible to be in a group insurance plan. So: if you or your husband work for a company that offers an insurance plan, you’re out of luck, even if you prepaid for your insurance prior to getting a job at a company that offers the group plan. Example: today, as a self-employed father of three, you buy a 1-year policy for yourself and your family. But, five months later, your wife gets a job where group insurance is offered as part of the package. In this example, you may only deduct five months’ worth of the cost of the insurance. The government doesn’t reward the self-insured, unfortunately.
A lot of Americans seem to have the mistaken and uttelry silly notion that other nations have free health care. Nothing could be further from the truth, but some people don’t want the facts. The costs of health care are rolled into much higher income tax and extremely high sales tax, to the extent that Americans would refuse to pay it.
Right now people have health insurance at work. Nothing would change. If you have a current plan, nothing would change. The cost of those plans may come down because more people would be enrolled with the same insurance companies. Now we pay for poor people who go to emergency rooms. we pay for poor people on public assistance. We pay for low paid workers like Wal Mart employees who don’t have insurance. If you lose your job and can’t afford Cobra or it runs out, and you had a serious illness in the past, today you are insurable. The insurance companies can deny to issue you a plan due to the fact they think you’re too risky. Even if you were enrolled with them for 15 years at your company — lose your job and they say, we’re done with you. If you can’t get insurance, (because they won’t take you) if you get sick, you lose your retirement account and house, and that sickness will cost you all you worked for, because the insurance companies refuse to accept you as an individual. When there’s a group though, the They have a cafeteria plan, which gives you many choices and the insurance companies are the same ones we have now. If you can’t afford to pay there will be subsidies and tax breaks. Ultimately everyone would be covered and there would be less infectious disease, less costly emergency rooms, and lower costs overall, to taxpayers, and insurance costs to individuals and companies would probably drop as well. It’s a good thing, it really is.