April 2013

Legislation Introduced To Permanently Deduct Self-Employed Health Insurance Costs

Monday, April 01, 2013
By Katie Vlietstra

The NASE enthusiastically supports H.R. 886,
America’s Small Business Tax Relief Act of 2013, introduced by Representative Jim Gerlach (R-Pa.) and cosponsored by Rep. Ron Kind (D-Wis.), which makes several key small-business tax deductions permanent, including the health insurance deduction for the self-employed, the signature legislative priority of the NASE.

A Level Playing Field

Under the current tax code, corporations are able to deduct health insurance premiums as a business expense and to forego FICA (Social Security and Medicare) taxes on these expenses. In addition, their employees are able to pay for health coverage with pre-tax dollars. However, the self-employed are unable to deduct premiums as a business expense. Since they do not receive this deduction, they are required to pay significantly more in self-employment tax, their payroll taxes.

Since the passage of the Small Business Jobs Act of 2010, which included a one-year self-employment tax deduction for health insurance costs of sole proprietors, we have aggressively advocated and courted champions in both chambers. Congressmen Gerlach and Kind introduced identical language in the 112th Congress, along with many other pieces of legislation in the Senate and House that provided for an extension of the health insurance deduction.

The Burden of Rising Health Costs

In June 2012, the NASE released its national health care survey, in which 85 percent of respondents indicated that rising health coverage costs have been detrimental to themselves, their families, their businesses, and their “bottom line” during the past three years. Juxtapose this against the fact that in 2011, the number of insured self-employed was at its highest: 77 percent. Yet, the self-employed pay an average of nearly $1,800 in additional taxes that no other business owners face because they simply decided to purchase health insurance.

“The ability for the self-employed to deduct their health insurance costs is paramount to the survivability of nearly 22 million Americans and their businesses. As it stands, the deduction averages around $1,800 per self-employed individual and has an economic impact in the billions,” said Katie Vlietstra, NASE Director of Government Affairs.

If the self-employed were allowed to fully deduct their health insurance costs as a business expense, roughly $39 billion would be injected annually into the U.S. economy that would allow for individuals to re-invest in their businesses, purchase goods, and hire additional employees.

Katie Vlietstra is Director of Government Affairs of the NASE and provides critical insight to policymakers on issues affecting our nation’s self-employed. You can contact her at


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