Talk To A Tax Attorney
Need a lawyer? Start here.
Health Insurance For The Self
Tax deductions for health insurance premiums for the self-employed
Did you know that premiums in Blue Cross plans are eligible medical expenses under the Canadian federal Income Tax Act and may create a tax credit for you? If you are self-employed, you may now be able to deduct your health coverage premiums from your annual income. Let us help you find the plan you need in a few steps.
Managing health care expenses
Do unexpected dental visits blow your monthly budget? What if your doctor told you that you would have to take medication for the rest of your life? When you have a personal health insurance plan, you can rest assured that any unexpected medical expense will be taken care of. Instead of managing unexpected expenses, consider planning for an affordable monthly premium.
If you are self-employed, you are the heart of your business, and planning ahead is part of the key to your success. Plan ahead for any unexpected costs of prescription drugs and dental visits, and protect yourself with disability coverage. With a health insurance plan from Blue Cross, you can protect your health, your business and your finances.
What do our insurance plans cover?
- Dental visits and fees
Are Insurance Premiums Deductible On Your Taxes If You Have Medicare
You can take the self-employed health insurance deduction for your Medicare premiums. If you overlooked this deduction in the past, you can file amended tax returns for the past 3 years. This could mean receiving thousands of dollars in tax refunds.
You May Like: Securedent Implant System
How Do I Get Dental Discounts
You are given a dental discount card, which you present at each dentist visit to get the lower prices on services. These plans dont reimburse the dentists as regular insurance does. Instead, you pay the dentist directly. But remember, you must use a dentist in your plans network in order to get any discounts.
Where Are Dental Insurance Premiums Deductible
For most taxpayers, the cost of medical and dental insurance premiums paid during the tax year are deductible on form 1040 Schedule A as a medical and dental expense. Only the total of all qualifying medical and dental expenses, including insurance premiums, that when combined exceed 10% of the taxpayers adjusted gross income , will actually be included in the total of all itemized deductions.
For example, if a couple has an AGI of $100,000 and a total of $8,000 of qualifying medical and dental expenses, including dental insurance premiums paid, then none of these expenses would be included as an itemized deduction. Ten percent of the AGI would be $10,000, which is greater than the couples total medical and dental expenses.
For a self-employed individual, the cost of dental insurance may be deducted on Form 1040, line 29, without having to itemize deductions on Form 1040 Schedule A with the 10% of AGI limitation described above.
Dont Miss: Does Aspen Dental Take State Insurance
You May Like: 1-866-416-2003
You Cant Be Eligible For An Employer
The second requirement is that you cant be eligible to participate in an employer-sponsored health insurance plan. If youre eligible to participate in a program sponsored by your spouses employer even if you choose not to participate in that plan you cant claim the self-employed health insurance deduction.
That requirement is determined on a month-by-month basis, so if you were eligible to participate in an employer-sponsored plan for five months out of the year and not eligible for the remaining seven months, you could deduct seven months of premiums.
Is Your Health Insurance Partially Subsidized By An Employer Or The Government
One of the benefits of obtaining health insurance through an employer is the fact that the rates will be much better than if you sought out the same coverage on your own. Many employers pay a portion of the premium for you. Many marketplace plans offer competitive rates because the government is paying a subsidy amount to offset the costs to individuals.
In either case, you can only deduct the actual portion of the premiums that you pay. There are rules and limitations to this as well, which the next two sections will answer.
Donât Miss: How To Obtain A Life Insurance License
What Does Dental Insurance Typically Cover
Thats not usually a problem, however, as dental insurance rarely covers cosmetic work. Instead, it only covers procedures strictly related to health and wellness. It has a three-tier structure, known as 100-80-50, and a typical annual maximum amounting to a median of $1,500.
Preventive caresuch as annual cleanings, X-rays, and sealantsis covered 100%. Basic proceduressuch as fillings, extractions, and periodontal treatment for gum diseaseare covered 80%. Major procedurescrowns, bridges, inlays, and denturesare covered 50%. Depending on your plan, root canals can fall into either the basic or major category. Most plans focus on preventive and basic care, and not all procedures are covered.
What Employee Benefits Are Pre Tax
Some of the most common pre tax benefits are commuter benefit, such as parking and transit fee deductions, and health savings account contributions. Post-tax benefits, in contrast, typically include more traditional benefits like Roth 401 contributions, disability insurance, and most health insurance plans.
Don’t Miss: State Farm Insurance Dog Breed Restrictions
How Much Can You Write Off As Business Expenses
In some cases, it is possible to incur medical expenses as a direct result of your work. Many performers and entertainers often incur legitimate medical expenses that are deductible as business expenses. However, you cannot deduct expenses that fall into the following categories:
Your insurance reimburses you for them.
You pay for the expenses with a flexible savings account .
You pay for the expenses with a health savings account .
They are part of a health reimbursement arrangement .
Self-employed taxpayers may be eligible to deduct up to 100% of the premiums they pay for coverage. You have to qualify for the self-employed health insurance deduction to receive this tax benefit. This above-the-line deduction is available to taxpayers no matter if they choose the standard or itemized deduction. Lets say you pay $300 a month for health insurance out of your own pocket each year. You may be eligible to take an above-the-line deduction of $3,600 for that year.
Your business must earn profits to claim the self-employed health insurance deduction. Also, the amount of your deduction cannot exceed your profits for the year. For example, if you only earned $2,000 from self-employment for the year, your self-employed health insurance deduction would be limited to $2,000. However, you may be able to deduct excess amounts as out-of-pocket medical expenses. You will have to itemize your deductions to take advantage of this.
Expenses And Benefits: Items For Disabled Employees
As an employer, if you provide equipment or services to a disabled employee so they can do their work, it doesnt count as a taxable expense or benefit.
- you dont have to report it to HMRC
- you dont pay tax or National Insurance on it
This doesnt change if your employee also uses the equipment or services outside work. However, you must offer it on similar terms to any other employee who is or becomes disabled.
Recommended Reading: Do Parking Tickets Affect Car Insurance
Recommended Reading: Embrace Pet Insurance Usaa
Is There A Health Insurance Deduction For The Self
If you buy your own health insurance, you should definitely know about the long-standing health insurance premium deduction for the self-employed.
Congress implemented a 25% deduction for self-employed health insurance premiums in 1987 and made it permanent in 1994. The self-employed received even better news in 2003 when premiums became 100% deductible.
If youre also eligible for a premium tax credit , you can only deduct the part of the premiums you pay yourself. That can get into some circular math, but there are two methods that the IRS will let you use to determine your deduction and your tax credit.
You cant take the self-employed premium deduction if you were eligible for group insurance from your spouses employer . That includes eligibility for reimbursements via a Qualified Small Employer Health Reimbursement Arrangement .
Phone And Internet Costs
Anyone from real estate agents and journalists to day care providers and jewelry makers could deduct part or all of their annual cell phone or internet bill.
What you can deduct: You can deduct your entire bill if you have a dedicated business cell phone or internet connection.
How it works: You must use your smartphone or internet service for business, and your employer if you have one must not reimburse you.
What else you can do: If you don’t have a dedicated line, you can deduct the percentage used for business.
Read Also: Does Liability Cover Broken Window
Extra Food And Beverages Consumed By Self
This information is for self-employed:
- on foot
- bicycle couriers
- rickshaw drivers
They can deduct the cost of the extra food and beverages they must consume in a normal working day because of the nature of their work.
The daily flat rate that can be claimed is $23.
If you are claiming this deduction you should be prepared to provide logbooks showing the days worked and the hours worked on each of these days during the tax year. The CRA may also ask for dispatch slips or other documents to support the days worked during the tax year.
If you want to claim more than the flat-rate amount, the CRA will also need:
- supporting receipts for all food and beverages claimed
- something that clearly shows the extra amount of food and beverages required because of the nature of your work, and how this amount exceeds what the average person would consume in terms of both cost and quantity
Business Travel And Meals
Whether it’s for a flight across the country or an overnight on the other side of the state, expenses for travel and food can be self-employment tax deductions.
What you can deduct: Flights, hotels, taxis and food are deductible business expenses as long as they’re for actual, legitimate business purposes.
How it works: You can’t deduct travel expenses for your spouse, your kids, or other people unless that person is your employee. Before 2021, you could deduct 50% of the cost of a meal if the meal was business-related, was not “lavish or extravagant,” you or your employee were at the meal, one of your business contacts got the meal, and the cost of the meal didn’t include a charge for entertainment. IRS Publication 463 has all the details. In 2021, however, you can deduct 100% of the cost of food or beverages provided by a restaurant.
What else you can do: Instead of deducting the actual cost of each meal, which can require a lot of receipt hoarding, you can use a standard daily meal allowance. Under this method, you deduct a flat amount instead of recording every single meal expense . The U.S. General Service Administration sets the standard meal allowance rate.
Recommended Reading: Car Insurance Open Sundays
How Do You Claim The Deduction On Schedule 1 Of Form 1040
Schedule 1 of Form 1040 is for reporting adjustments to income like Schedule C income or self-employed health insurance deductions.
Most tax deductions come with terms, and the self-employed health insurance deduction is no different. You can use the Self-Employed Health Insurance Deduction Worksheet to determine how much of your premiums you may deduct on Schedule 1. Certain scenarios call for using a different Self-Employed Health Insurance Deduction worksheet.
Your insurance plan was established under your business through the health insurance marketplace.
You are eligible to claim the premium tax credit for your health coverage purchased through the marketplace.
If you receive ACA premium subsidies, keeping up with reporting income changes is critical. Otherwise, you may cancel out your deduction if you owe tax penalties. You will have to pay the excess back if your actual income is higher than what you reported when applying for APTC for your health coverage. If your income is lower than what you reported, you may be in for a pleasant surprise: a little boost to your tax refund.
Do Aca Tax Credits Make Health Insurance More Affordable For The Self
Thanks to the ACA, federal tax credits obtained via the exchanges are helping many families subsidize the purchase of individual health insurance. The tax credits are great for the self-employed, who had to foot the entire bill for their health insurance prior to 2014. Employees who get employer-sponsored health insurance typically enjoy a substantial subsidy in the form of pre-tax premiums and employer contributions to the premium. The ACA makes similar subsidies available for many self-employed people, and the American Rescue Plan has made those subsidies larger and more widely available.
The tax credits are available to households with incomes of at least 100% of the federal poverty level , as long as the enrollees do not have access to Medicaid or employer-sponsored health insurance that is considered affordable .
From 2014 through 2020, there was an income cap of 400% of the poverty level, above which subsidies were not available. But the American Rescue Plan eliminated that income cap for 2021 and 2022, temporarily fixing the subsidy cliff. And the Build Back Better Act would extend that through 2025. The Build Back Better Act would also eliminate the lower income threshold for subsidy eligibility through 2025, which would temporarily fix the coverage gap.
Also Check: Do Parking Tickets Make Your Insurance Go Up
Designating Your Plan Sponsor
If you qualify, you get the health insurance deduction whether you purchase your health insurance policy as an individual or have your business obtain it. If you purchase your health insurance plan in the name of one of your businesses, that business will be the sponsor. However, the IRS says you may purchase your health coverage in your own name and still get the self-employed health insurance deduction. This may be advantageous because it allows you to pick which of your businesses will be the sponsor at the start of each year. Obviously, you should pick the business you think will earn the most money that year.
Moreover, if you have more than one business, you can have one purchase medical insurance and the other purchase dental insurance and deduct 100% of the premiums for each policy, subject to the income limits discussed above. This will be helpful if no single business earns enough income for you to deduct both policies through one business.
Are Health Insurance Premiums Tax Deductible In Canada For The Self
Its that time of the year again: tax season! If youre a self-employed individual, its important to know what exactly you can claim with regard to your health insurance benefits. No doubt youve wondered if you can claim your insurance plan on your taxes, so lets break it all down for you.
Lines 330 and 331 of the Canadian tax return refer to the Medical Expense Tax Credit that allows individuals to be reimbursed for certain medical expenses, but its not immediately obvious what services or items can be claimed. The biggest question people ask is whether or not their health insurance premiums are tax deductible.
The true answer to that question isit depends.
You May Like: Ail Scam
Can You Deduct Health Insurance Premiums Without Having To Itemize Your Returns
You may be eligible to claim the self-employed health insurance even if you dont itemize deductions. This is an above-the-line deduction. It reduces income before you calculate adjusted gross income . However, this deduction cannot reduce your Social Security and Medicare tax. You can report the self-employed deduction on line 17 of Schedule 1 of your tax return.
The Home Office Deduction
If you work from your home or use part of it in your business, then self-employment tax deductions like this one could get you a break on the cost of keeping the lights on.
What you can deduct: A portion of your mortgage or rent property taxes the cost of utilities, repairs and maintenance and similar expenses. Generally, this deduction is only available to the self-employed employees typically cannot take the home office deduction.
How it works: Calculate the percentage of your home’s square footage that you use, in the IRS words, exclusively and regularly for business-related activities. That percentage of your mortgage or rent, for example, becomes deductible. So if your home office takes up 10% of your house’s square footage, 10% of those housing expenses for the year may be deductible. IRS Publication 587 outlines a lot of scenarios, but note that only expenses directly related to the part of your home you use for business say, fixing a busted window in your home office are usually fully deductible.
What else you can do: Choose the simplified option, which lets you deduct $5 per square foot of home used for business, up to 300 square feet thats about a 17-by-17-foot space. You wont have to keep as many records, but you might end up with a lower deduction, so consider calculating it both ways before filing.
Recommended Reading: Clear Choice Dental Pricing