Health insurance is one of the largest expenses for self-employed individuals. The good news: there are several ways to deduct these costs.
Self-Employed Health Insurance Deduction
Sole proprietors, partners, and 2%+ S-Corp shareholders can deduct health, dental, and vision premiums as an above-the-line deduction. The deduction can’t exceed net self-employment income.
S-Corp Owners: Special Rules
Premiums must be included in W-2 Box 1 (not FICA wages). The corporation deducts them as an employee benefit. You claim the self-employed health insurance deduction on your personal return.
NJ Treatment
NJ generally follows federal treatment. NJ also has its own individual mandate requiring minimum essential coverage.
The HRA Option
Small businesses with no employees other than the owner and spouse can set up an ICHRA or QSEHRA to reimburse premiums tax-free.
Disclaimer: The information provided is for general educational purposes only and does not constitute tax, legal, or investment advice. This content is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Tax outcomes depend on your specific facts and circumstances. Viewing this material does not create a CPA-client relationship. Personalized advice is provided only through a signed engagement letter.
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