self employed health insurance deduction

[moabraham1]

Hello


thanks for the help.



Pub 225 pg 22 ch 4 Farm business expenses


If you are self-employed , you can deduct your payments for medical , dental , and qualified long-term care insurance coverage for yourself, your spouse, and your dependents
when figuring your adjusted income on your Form 1040.
Effective March 30, 2010 , the insurance can also cover any child of yours under age 27 at the end of 2011, even if the child was not your dependent.

Generally, this deduction cannot be more than the net profit from the business under which the plan was established.

Does anyone know which situations the deduction can be more than the net profit from the business under which the plan was established?

[mwcpa]

from IRS (http://www.irs.gov/uac/Health-Insurance-Tax-Breaks-for-the-Self-Employed)

"You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:
•A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
•A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., box 14, code A.
•A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement."

More from IRS Publication 525 (http://www.irs.gov/publications/p535/ch06.html#en_US_2011_publink1000208843)

"How to figure the deduction. Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. However, if any of the following apply, you must use Worksheet 6-A in this chapter.
•You had more than one source of income subject to self-employment tax.
•You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
•You are using amounts paid for qualified long-term care insurance to figure the deduction."

Look for "Worksheet 6-A. Self-Employed Health Insurance Deduction Worksheet," it may be helpful.

[moabraham1]

hello

thanks for the reply


I have looked at worksheet 6-A at pub 535 and I do not see your point.

According to Section 162{l}{2} Limitations






{A}Dollar amount


No deduction shall be allowed under paragraph {1} to the extent that the amount of such deduction exceeds the taxpayer's earned income {within the meaning of section 401{c} } derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established.

Section 162{l}
{1} Allowance of deduction


In the case of a taxpayer who is an employee within the meaning of section 401{c} {1} there shall be allowed as a deduction under this section an amount equal to the amount paid duing the taxable year for insurance which constitutes medical care for -


{A} the taxpayer,


{B} the taxpayer's spouse,


{C} the taxpayer's dependents , and


{D} any child { as determined by section 152{f}{1}} of the taxpayer who as of the end of the taxable year has not attained the age of 27.

I do not see any exceptions that say the self employed health insurance deduction can exceed the earned income[ net profit}. Are you saying the definition of net profit in above sentence is different than the definition of earned income in code or Worksheet 6-A?

[moabraham1]

hello


Could the exception to the line Generally, the deduction cannot be more than the net profit from the business under which the plan was established be if you could use the farm optional method or nonfarm optional method or both methods in calculating self employment earnings then it would be possible your self employment earnings would be higher than your actual net profit and therefore your self employed health insurance deduction could be more than actual net profit from business.

Does this make sense?

[mwcpa]

not sure what you are trying to figure out... i think you are making it more complex than needs to be...

if you have a profit from self employment then health insurance is deductible (under the rules) to the extent of the net self employment income.