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Tax Breaks for Health Insurance

  Sanjiv Gupta CPA  Published 
Tax Breaks for Health Insurance

Health insurance is one of the largest costs that most people deal with on a monthly basis other than the mortgage. Health insurance for those who are self-employed is normally higher than those who have employers offset health insurance. Luckily, there is a tax break for those who are experiencing large health insurance payments.

To qualify for the IRS health care tax deductions for you and your family you must be either a self-employed individual with a net profit, have a self-employed partner who qualifies or is a shareholder with more than a 2 percent stock in an S corporation.

The insurance plan must be established under your name or the name of your qualifying partner. For the self-employed, this can be your personal name as long as this is the name the business is run under. The self-employed individual or the stockholders must be the one who is paying the health insurance premium for this credit to apply.

Stockholders must have the health insurance plan in their name or be reimbursed by the business for health costs to be eligible. This must be verifiable via W-2. To qualify for the tax credit, you must use the Schedule C or 1040 form to apply for the credit.

This tax credit can be a large offset for those who are self-employed, as health insurance costs can equal up to a large amount of self-employed income each year. Self-employed persons also pay a higher tax rate than those with an employer so this credit can decrease the tax amount in an effective manner.