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Hallelujah!

Form 1040 (Schedule SE)

Line 3 (Short of Long Schedule SE)

For 2010, you can reduce your net self-employment income by the amount of your self-employed health insurance deduction entered on line 29 of Form 1040....

I thoroughly appreciated it years ago when the tax laws changed to allow self-employed people to deduct the cost of health insurance from our income. It took a few years for the deduction to reach 100% at both the federal and state level, but it's been there for quite a while now.

There's only been one problem -- the deduction goes on Form 1040, so I've been paying self-employment taxes on the cost of my health insurance since 1990. "Self-employment tax" as in the full Social Security tax, not the 50% of the tax that employed people pay while their employers pay the other half, the whole "multiply net profit from Schedule C by .9235 then multiply the result by .153 and send us the money" tax.

Yes, I've always been saved from paying income taxes on half of my self-employment tax, but paying what works out to be 14.13% tax on health insurance premiums that cost considerably more than employed folks pay for their insurance has been a harsh "gotcha."

It's apparently just a one year provision, part of the Small Business Jobs Act of 2010. Who knows what next year will bring. But for this year? Wow. It's making a considerable difference in my current financial situation.

Why, yes, as it just so happens, I am working on my taxes. 'Cause I knew you'd never guess....

Comments

( 6 comments — Leave a comment )
drpaisley
Apr. 9th, 2011 04:14 am (UTC)
Everything's bigger in Taxes.
voidampersand
Apr. 9th, 2011 04:49 am (UTC)
I used to have a truck like that too.
ceemage
Apr. 9th, 2011 07:20 am (UTC)
If you're going to have a system where people have to pay for healthcare (he says, looking smugly at his new NHS stents), you should at the very least make it 100% deductible for everyone. And I say that as both an accountant *and* a concerned citizen.

That sounds incredibly smug for this time of the morning, doesn't it? Whatever...
madfilkentist
Apr. 9th, 2011 01:29 pm (UTC)
The next trick to screw self-employed people and other small businesses: You'll have to file a 1099 every time you spend more than some small amount, I think it's $500, for business purposes.

When people claim a free-market economy would let big business run wild, they should think of how disproportionately the burden of complex and arbitrary regulations falls on businesses too small to hire an army of accountants and lawyers.
minnehaha
Apr. 11th, 2011 03:48 am (UTC)
I volunteered to do a family member's taxes, and B found the project interesting and took it on. We got a surprise refund out of it. Welcome news indeed.

K.
( 6 comments — Leave a comment )

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