Let’s talk about deduction for Self-Employed Health Insurance. If you are self-employed, you can usually deduct the health insurance premiums that you pay for yourself and your family on your personal tax return. This is an above the line deduction so you get to reduce your income dollar for dollar even if you’re not itemizing your deductions. If you’re a sole proprietor, you don’t deduct this in the business return on Schedule C; you would deduct on Schedule 1. If you’re in a partnership, you can either ask the partnership to reimburse you if you’ve paid for the premiums yourself or the partnership can pay the premiums directly. They are deducted by the partnership and reported to you as a guaranteed payment and you’d make the deduction on Schedule 1 of your tax return. If you are a shareholder in an S Corp, the payments would go on your W-2 as income and then you deduct them on Schedule 1. But watch out – if you are eligible and participate in an employer sponsored plan, either for yourself or your spouse, you may not deduct the Self-Employed Health Insurance, even if you decline the other coverage. Also for the Federal rules, you may deduct the premiums you pay for your children until they’re age 27, even if they’re no longer your tax dependent. But in New Jersey, they must be your tax dependent before you can deduct their premiums. And if the profit from your business is less than the amount of premiums, you may have further limitations on what can be deducted.
