NASE Health Blog

Advice and information on small business health insurance coverage.

Still Doing 2010 Taxes And Trying To Obtain Health Insurance Deduction [Ask The Experts Q & A]

Wednesday, August 31, 2011
Q: I am doing my 2010 taxes and told my tax preparer about the one-time business deduction for health insurance premiums for 2010. However, she still records it as an adjustment to income. How do I convince her that this is okay for 2010?

A: The IRS accounted for the new deductibility differently than most people expected. The deduction for federal income tax is still accounted for in the same way as in previous years, by including the qualified premiums on page one of Form 1040, Line 29. This is an adjustment to income as you mentioned and is indeed the same as in previous years, so that part of your tax preparer's efforts is most likely correct. 

The new part for 2010 is that the deduction is also eligible for reducing Self Employment Tax. The SE tax deduction is the new part and is accounted for separately on Schedule SE, Self Employment Tax. The amount that is included on Line 29 will also be used in the calculation at Line 3 on the Schedule SE. So, take a look at the Schedule SE and make sure that you see that the total includes the deduction from page one of the 1040. I know it is kind of weird since the amount isn't listed separately, but Line 3 just says, "Combine lines 1a, 1b, and 2. Subtract from that total the amount on Form 1040, Line 29 ...."  so you have to just make sure that the amount was deducted in computing the amount on line 3. That is how the SE tax gets reduced for this deduction. 

Check out the Schedule SE and see if the amount is included.  If so, then the tax preparer has included the deduction and you did save the taxes that you deserved. 

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