The IRS recently reversed a long-held position that self-employed individuals may deduct Medicare premiums from their self-employment income. Self-employed who did not deduct the Medicare premiums before, and still have the prior tax returns within the statute of limitation, may file amended returns to claim the deduction.
Chief Counsel Advice 201228037 clarifies an IRS position that previously appeared only for tax years 2010 and forward that allowed the deduction. Prior to 2010, Form 1040 instructions flatly stated that Medicare premiums could not be used to figure the self-employed health insurance deduction.
The prior IRS position was based on the notion that, because Medicare was a federal program, the cost could not be attributed to a taxpayer’s trade or business. The revised position states that because Medicare is insurance that constitutes medical care under Internal Revenue Code Section 162(l), it is similar to other health insurance, and its premiums can similarly be deducted.