New Health Insurance Tax Deduction

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On Sept 27, 2010, H.
5297 was signed into law.
The legislation provides an important tax break for the self-employed to help them pay for their health insurance.
The self-employed have not received the same tax benefit related to health insurance expenses that all other businesses entities have enjoyed.
Various business entities are able to fully deduct the cost of health coverage as a business expense, saving them a significant amount in payroll taxes.
With the passage of H.
5297, the self-employed will be allowed to take a one-year tax deduction for health costs in the self-employment tax.
To qualify for this one-year self-employment tax deduction on health costs you must meet ALL of the following requirements:
  • File a 1040 Schedule C or Schedule E with earned income
  • Pays self-employment taxes via IRS Form 1040 Schedule SE
  • Pays for Individual or Family health coverage in 2010.
Lawmakers only provided this tax benefit to the self-employed for one year to provide some temporary bottom-line cost savings to America's smallest businesses in this difficult economic time.
It is important to reiterate that the self-employed are the only business entities which do not receive business deduction for their health care costs.
All other businesses are able to fully deduct their health costs.
The National Association for the Self-Employed, as well as the group Equity for Our Nation's Self-Employed are continuing to urge Congress and the Administration to permanently level the playing field in regards to health insurance deduction for the self-employed.
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