This question is asked to determine how much a a self-employed health insurance deduction you can take. The sum of the deductible portion of self-employment taxes, your self-employed retirement deduction and your self-employed health insurance deduction are limited to your net profit from self employment. Until you tell TurboTax the amount of your self-employed retirement deduction is attributable to the same business as your self-employed health-insurance deduction, TurboTax assumes that your entire self-employed health-insurance deduction is permitted (up to the amount of your net earnings from self-employment. As soon as you enter the required information, TurboTax corrects the calculation, reducing your self-employed health insurance to the amount that remains after accounting for the other two deductions.
If you have only one self-employment business, the amount of self-employed retirement deduction that is attributable to that business is the entire self-employed retirement deduction.
Because the self-employed retirement deduction only defers taxable income, it's often advisable to limit your self-employed retirement contributions so as to maximize your self-employed health insurance deduction. Unlike the amount of your self-employed retirement deduction, the amount of your self-employed health insurance deduction is an amount on which you will never pay taxes.
