Turbo Tax not allowing me self employed health insurance deduction. Sch 1 Line 29 can't be filled out. No explanation. Does i401K preclude SE Health Insurance? Crap.

[paddams]

Followed instructions in Turbo Tax Help Center - went to Business > Other Common Deductions > Health Insurance and put in the amount. Finish with business and it shows $0 for SE Health Insurance deduction. Click on Update SE Health Insurance and there's a paragraph saying no portion is deductible. Is it because I'm optimizing my i401K contribution on Sch C income? Cannot override Line 29 on Schedule 1. Can't write anything in that block. Double clicking goes nowhere. TurboTax not giving any explanation. Quite the opposite. Everything I read says I'm due this deduction. Have taken in previous years. Did not take in 2017 as premiums were paid by Flex Plan. Most premiums paid by Flex Plan in 2018 until I ran out of funds and had to pay by bank draft. In 2019 my payments will be much more substantial. I made a profit, well above the premiums paid ($12K vs $1K). Mp explanation from TurboTax and asking community instructions and answers just simply aren't working. As always, some part of TurboTax just doesn't make sense, doesn't work and leaves me high and dry.

[Zbucklyo · Accepted solution]

Very possibly.  The sum of Lines 27-29 on Schedule 1 can't exceed your net income from self-employment (deduction of one-half of self-employment tax, contributions to self-employment retirement plans, self-employed health insurance premiums).

[paddams]

so my i401K contribution is equal to net Sch C income minus 1/2 SE Tax. So line 27 (1/2 SE Tax) and line 28 (qualified plans) equal net income from Sch C.  I could reduce my contribution (I'm paying the max) accordingly, but the net result to line 7 of 1040 would be the same - total of qualified plan contribution and self employed health insurance premium. I'm better off investing. Do you agree? Maybe in previous years instead of i401K was doing SEP-IRA and not deducting as much. Of course all my income was Sch C until the government thought I'd be better off working part time for several clients and getting paid W-2 wages with NO Benefits. Thanks for your help. Let me know if I understand correctly.

[TaxGuyBill]

In my opinion, you should reduce your retirement contributions.  It seems counter-intuitive to put money in a tax-deferred account (which will be taxed with it is withdrawn) when it is not saving you any tax.

[Zbucklyo]

You do understand correctly.  First, with a solo 401k, as you noted, subject to other limitations, it is possible to contribute up to your Schedule C income minus half self-employment tax.  With a SEP, you are limited to 18.59% of your net Schedule C income, so you'd be able to take at least a partial health insurance deduction.

While taking either deduction serves the purpose of eliminating (at least for the current year) paying any federal income tax from self-employment income (still have to pay self-employment tax), at least the solo 401k gives you the opportunity to earn something on the money.  

[Zbucklyo]

@TaxGuyBill I was going to add that to my answer above - not that I think it is necessarily the better choice, but don't forget that, if you live long enough you will pay tax on that money.  And someone will eventually pay tax on it in any case.  That is not like the health insurance premiums that will be forever untaxed.

[paddams]

Good points & thank you for your answers & enlightenment. Same advice for next year when premiums increase from $1K to $6K? Drop i401k another $5k?