Self-Employed Health Insurance DeductionYou may be able to deduct ALL - that is 100% - of the amount you 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, C-EZ, or F.
- A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), 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.
The insurance plan must be established under your business. You may be allowed this deduction whether you paid the premiums yourself or your partnership or S corporation paid them and you included the premium amounts in your gross income. Take the deduction on line 29 of Form 1040.
Qualified long-term care insurance.
You can include premiums paid on a qualified long-term care insurance contract for you, your spouse, or your dependents when figuring your deduction. But, for each person covered, you can include only the smaller of the following amounts.
- The amount paid for that person.
- The amount shown below. (Use the person's age at the end of the year.)
- Age 40 or younger-$270
- Age 41 to 50-$510
- Age 51 to 60-$1,020
- Age 61 to 70-$2,720
- Age 71 or older-$3,400
Qualified long-term care insurance contract.
A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. The contract must meet all the following requirements.
- It must be guaranteed renewable.
- It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits.
- It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed.
- It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses.
Qualified long-term care services.
Qualified long-term care services are:
- Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and
- Maintenance or personal care services.
The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner.
Chronically ill individual.
A chronically ill individual is a person who has been certified as one of the following:
- An individual who has been unable, due to loss of functional capacity for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual. Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence.
- An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
The certification must have been made by a licensed health care practitioner within the previous 12 months.
Benefits received.
For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525.
Above Information obtained from the Internal Revenue's Website on 9/21/2006
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