Jul 30

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Self-employed can deduct Medicare premiums

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.


About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2012/07/self-employed-can-deduct-medicare-premiums/

1 comment

  1. registering as self employed

    Useful Content, and for those considering self-employment. Will post about your site in my Ecademy Group. Thanks again.

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