BillM223
Expert Alumni

Deductions & credits

There is a peculiar interaction between the self-employed health insurance deduction, the net income from Schedule C, and contributions to Self-Employed SEP, SIMPLE, and Qualified Plans. That is, as one increases, the other may decrease, particularly if these amounts are close to your net business income.

 

Please see the 1040 Instructions (Schedule 1 instructions begin on page 84), especially for line 14, 15, and 16. Also see the Self-Employed Health Insurance Deduction Worksheet at the top of page 89. 

 

You need to step through this worksheet line by line because you will find that a large enough retirement contribution will wipe out the self-employed health insurance deduction. Read line 2 in the worksheet closely.

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