I am self employed & husband is retired firefighter. We pay for health insurance thru his former employer. Can I deduct cost of my insurance premiums as a business exp?

[KKMMCC]

My husband is a retired firefighter.  I am self employed and still working.  We pay for medical insurance through the city he worked for -- for him as a retiree and me as his spouse.  The cost of these premiums is taxable income to us and we receive a 1099-R each year for the cost of benefits he receives (like health, dental, vision insurance).  As a former public safety officer, he is able to exclude up to $3,000 from our gross income for health insurance premiums deducted from his monthly pension benefit.  When filling out Schedule C for my business, can I use the cost of the health insurance premiums for me as a business expense?

[Phillip1 · Accepted solution]

No. 

Premiums from an employer plan (even if paid through a pension plan) are not deductible for the self-employed health insurance deduction:

See the following from IRS Publication 535:

The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business.

• For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual.

• For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan won’t be considered to be established under your business.

• For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or the S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 in box 1 as wages to be included in your gross income. Otherwise, the insurance plan won’t be considered to be established under your business.

Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer can’t be used to figure the deduction.

Other coverage.   You can’t take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you didn’t actually participate. In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2016, don’t use amounts paid for coverage for that month to figure the deduction.