Amount of Medical Deduction for Self-Employed

[ddjolley]

My wife and I both have Schedule C businesses.  This year her business is the sponsor of our medical insurance plan.  She had gross revenues of 21,136 and expenses (exclusive of medical and LTC insurance) of 9,264 leaving 11,872.  Medical and LTC insurance premiums were 17,323.  I would say that the entire remaining amount of 11,872 should be applied to the 17,323 of medical and LTC premiums and the remaining  5,451 of medical and LTC premiums should be transferred to Schedule A.  For some reason, it appears that instead TT transferred 9,270 to Schedule A.  Why is this?  Thanks.

         ... doug

[Zbucklyo · Accepted solution]

One possibility is the limitation on how much of her self-employed medical insurance premiums she can deduct on Line 29 of Form 1040.  She can only deduct her net profit from self-employment minus one-half her self-employment tax minus any contributions to retirement plans as a result of her business income (e.g., SEP-IRA or solo 401 (k)).

[ddjolley]

Although I've done a lot of reading on this subject, this is the first time I've heard it mentioned that self-employment tax is involved.  However, it does seem to be a factor.  I talked to TT about it and they tell me that the computation is correct; and, once I print out the return I'll be able to tell how the computation was performed from the worksheets.  Thanks for the input.

[dmertz]

The sum of the portions of lines 27, 28, and 29 on Form 1040 attributable to your wife's self-employment business cannot exceed her net profit from self employment calculate on Schedule C line 31.  TurboTax is imposing this limit via the calculations on the Self-Employed Health and Long-Term Care Insurance Deduction Worksheet.

[ddjolley]

Again thanks for the clarification.  You sound very knowledgable and I'm sure what you say is correct.  I just can't actually step through the process myself so that I can see how it all works until I have access to more of the numbers on the return.  I'll get there, just not until the return is ready for filing.  I will keep your answer on file for reference when that day comes.  Thanks again for your help.