Medical Deduction: Deduct Self Employment Medical Costs

Taking a deduction for self-employed medical plan costs can seem confusing but it is actually very simple. First you need to determine if you qualify for the deduction. One of the main requirements of taking this deduction is to see if you filed a Schedule C or F on your federal tax return. You can also take such a deduction if you receive self-employment earnings through a partnership or through an S corporation if you own at least 2 percent of the stock in said corporation.

Taking the Medical Deduction

If you determine that you are eligible for the self-employed medical plan cost deduction you must first calculate your total allowable health insurance deduction. To calculate this number simply take your total self-employment income and subtract 50 percent for self-employment taxes and then subtract any retirement contributions to arrive at your total allowable health insurance expenses.

Reporting a Loss

If you report a loss for the year you cannot deduct health insurance costs for that year, but you can still claim your health insurance benefits on your Schedule A if your decide to itemize.

Hold Onto Your Receipts

It is important to keep all your health insurance receipts because they will come in handy at the end of the year when you decide to calculate your deduction. They will also come in handy if the IRS ever decides to audit you. Remember to always consult with a tax professional if you have any questions about how to deduct something. It is better to spends little time and money upfront instead of a lot of time and money in the case you are subject to an audit.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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