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What Is the Health Insurance Deduction for a Sole Proprietor?

by Bob Haring, Demand Media

A sole proprietorship is owned by a single individual; it is the simplest of the recognized business entities to set up. Sole proprietors fall under different tax rules than partnerships or corporations.

A sole proprietor with no employees can deduct 100 percent of the premiums for health insurance for himself, his spouse and any dependents under the age of 27. The taxpayer can’t be covered by any other health insurance, and the premium can’t exceed the profits of the business. The deduction is taken on Line 29 of Form 1040 or 1040A, and a taxpayer doesn’t have to itemize deductions to qualify.

A sole proprietor can hire employees and deduct the health insurance premiums for group health insurance for those employees. These premiums count as business expenses and are deducted on Line 14 of Schedule C, profit and loss from business. This reduces the net income of the sole proprietor.

Both group insurance deductions and personal insurance deductions can include costs for long-term care insurance. There are limits on personal long-term care deductions based on a taxpayer’s age. Also, a taxpayer’s deduction can be taken for any Medicare premiums.
About the Author

Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. “World.” Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.

Additional information on the health insurance deduction for business owners:

Can Business Owners Reimburse Themselves Tax-Free for Health Insurance?

HRAs Are Still a Viable Tax Savings Device for Small Businesses

Section 105 Plans: How to Save Taxes if You Own a Microbusiness


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