self employed health insurance premium deduction if paid by spouse?

[Cindy62707]

Husband is self employed and on Medicare.  He also is covered by wife's health and dental paid out of her retirement check.  Can both premiums be put on his Schedule C as a business expense?

[Bsch4477]

Someone  who is both self-employed and eligible to participate in an employer’s subsidized health plan cannot take the deduction. This rule holds if the employer is the individual’s employer, or the employer of the individual’s spouse, dependents, or child who is under 27 at the end of the tax year, as determined for each calendar month.

[NCperson]

@Cindy62707 - can you provide more detail on the spouse's medical plan? as you state it comes out of their retirement check, is the spouse still employed? is this COBRA? is this state insurance? what insurance is coming out the of retirement check? 

is this 'retirement check' a form of pension? 

it may be deductible - depends on your response.....

@Bsch4477 -- "subsidized" means "no double dipping", right? meaning if the premium is already deducted on Schedule A or subtracted from the paycheck on a pre-tax basis, it is not eligible to be deducted as a self-employed health insurance deduction, right?????  Most all medical insurance, even Medicare, is subsidized in the context that the beneficiary isn't paying the full fair share of the insurance cost - the US Government (Medicare) , or the employer tends to kick in a lot of money to make the insurance affordable. 

[Mike9241]

this is what the instructions to schedule 1 say. this is where the deduction for S-E health insurance would show.

The insurance plan must be established under your business. If you are filing Schedule C or F, the policy can be either in your name or in the name of the business. It would seeem you spouse's insurance would not meet this criteria. your Medicare premiums per IRS CCA 201228037 can also be taken as S-E Health insurance.  

[NCperson]

@Mike9241 question:... I appreciate the language states the insurance be in YOUR NAME or the name of your business.  

But for a Joint return, why wouldn't the insurnace premium paid by the spouse under the spouse's employer's plan be an eligible health insruance deduction? The spouse is part and parcel to the tax return (let's assume this is a JOINT return) and therefore "YOU" includes this spouse, right?   

(I am assuming the premium is paid with after tax dollars by the spouse as a payroll deduction.  Clearly if the dollars were pre-tax premiums, my question is moot). 

thanks!

@Bsch4477 

[Mike9241]

this is what the instructions for schedule 1 says

The insurance plan must be established under your business. If you are filing Schedule C or F, the policy can be either in your name or in the name of the business.  I don't see where the spouses insurance meets this criteria.

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This is exactly the same as the rules for a 2% S-Corp shareholder.

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I have seen other sources also say the same (including Thompson Reuters Checkpoint 1040 Quickfinder - TR  produces professional tax preparation software) and none that say differently - the policy must be in the sole proprietor's name or the name of their business. the only exception i know of is medicare but thats covered by the CCA put out by the iRS

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could other authoritative sources say differently. I suppose. then the question becomes which is correct.

[NCperson]

@Mike9241 thank you 

[Cindy62707]

Husband is sole proprietor LLC. He has Medicare and can deduct his part B premiums from what I read. 

Wife is retired and receives pension from SURS (State University Retirement System). In the monthly pension check there is a deduction for medical insurance and dental insurance.  

Because husband has no dental insurance the whole family is on the dental plan.  SURS requires the whole family be on the medical plan since the whole family is on the dental plan.  The cost for both plans are taken out of the wife’s monthly retirement pension check.  She is no longer employed so this has nothing to do with getting a paycheck from her previous employer. 

Does that help clarify?

[Cindy62707]

That’s what I thought too.  His name is on the plans as a covered person even though the wife is essentially paying for it out of her retirement check. So he is benefiting highly (especially under dental as he would have no dental insurance without the dental plan from the wife’s retirement check. 

[TomD8]

As @Bsch4477 stated originally, you can only claim the self-employed health insurance premiums write-off for months when neither you nor your spouse were eligible to participate in an employer-subsidized health plan.

The term "employer-sponsored coverage" refers to health insurance obtained through an employer—the most common way Americans get insurance. Employer-sponsored coverage includes not only insurance for current employees and their families, but can also include retired employees. Further, federal law gives former employees the right to stay on their employer's health insurance, at their own expense, for a time after leaving a job. That, too, is employer-sponsored coverage.

[NCperson]

@TomD8 @Mike9241 @Bsch4477 

I wanted to circle back to this one.  While I do embrace what you stated, curious how you reconcile that with this IRS material:

https://www.irs.gov/pub/irs-pdf/p4491.pdf

please see page  199....

How do I handle self-employed health insurance deduction?
Self-employed taxpayers who reported a net profit on Schedule C for the year may be able to deduct the
cost of their health insurance paid as a deduction from their gross income. The insurance plan must be
established under the trade or business and the deduction cannot be more than the earned income from that
trade or business. When filing Schedule C, the health insurance policy can be either in the taxpayer’s name,
the spouse’s name (if Married Filing Jointly), or in the name of the business.
Medicare premiums voluntarily paid to obtain insurance in the taxpayer’s name that is similar to qualifying
private health insurance can be used to figure the deduction. The spouse’s Medicare premiums qualify
for the deduction when Married Filing Jointly even though paid from the spouse’s benefits. Include health,
dental, vision, supplemental, limited coverage, and long-term care (LTC) premiums. LTC is limited to the
deduction cap for Schedule A, based on age.
Self-employed taxpayers cannot deduct payments for medical insurance for any month in which they were
eligible to participate in a health plan subsidized by their employer, a spouse’s employer, or an employer
of the taxpayer’s dependent or child under age 27 at the end of the tax year. Taxpayers cannot deduct
payments for a qualified long-term care insurance contract for any month in which they were eligible to
participate in an employer-subsidized long-term care insurance plan.

[Bsch4477]

I think the issue is what entity is providing the medical insurance.  If Medicare or or a company like Aetna, Blue Cross, etc. which is taken out and paid by the spouse, those premiums are deductible. If the policy is covered by or eligible to be covered by an employer, then no self employment deduction.