With the enactment of the Small Business Jobs Act of 2010, self-employed taxpayers who pay their own health insurance costs can now reduce their net earnings from self-employment by these costs.
Previously, the self-employed health insurance deduction was allowed only for income tax purposes. For tax year 2010, self-employed taxpayers can also reduce their net earnings from self employment subject to SE taxes on Schedule SE by the amount of self-employed health insurance deduction claimed on line 29 on Form 1040.
Taxpayers can claim the self-employed health insurance deduction if the insurance plan is established under their business and if any of the following are true:
- They were self-employed and had a net profit for the year,
- They used one of the optional methods to figure net earnings from self-employment on Schedule SE, or
- They received wages from an S corporation in which the taxpayer was a more-than-2-percent shareholder.