We all know that health insurance can play a significant role in our current spending. So, any news that methods exist which allow us to deduct some of this burden is always welcome. For self-employed people, there is now a possibility to reclaim 50% of self-employment tax (2014). Of course, this tax primarily goes to pay for Social Security and Medicare. This income tax reduction means that you can gain back a large part of what you need to pay for medical insurance this season in the form of a tax return on the following tax season. Our post today will examine how to receive a self employed health insurance deduction this tax season.
What is the Self-Employment Tax?
As you probably know, if you’re already working in a self-employed business, the Self-Employment Tax requires that you pay the Social Security and Medicare taxes adjusted to your level of income which you must figure out yourself using a table released by the IRS. People who are employed through traditional employers don’t need to make these calculations themselves since it falls on the shoulders of their employer. You must pay the self-employment tax if either your net earnings (from self-employed projects) reached $400 or more in the past tax season or if you earn a church employee wage of $108.28 (or more).
How to Qualify for a Deduction of the Self Employment Tax 2014
The good news about being self-employed and having to manage your own taxes for yourself is the fact that you might be eligible to deduct your ‘employer-equivalent’ of this tax. This is a measure taken to ensure that self-employed workers don’t end up paying more than their hired counterparts.
The EITC (The Earned Income Tax Credit) is the name of the deduction you might be able to get back from your income tax. The EITC includes deductions from your medical insurance, basically. To qualify for the EITC, you must file a tax return (even if you weren’t required to and even if you don’t currently owe any tax). But, you should only do so after finding out if you are eligible for it.
To find out if you are eligible for the self employment tax 2014 deduction or if your child meets the criteria which would qualify you for it instead, the easiest way is using the EITC Assistant. The IRS devised this program to help people figure the EITC eligibility out. The eligibility is calculated at a month-per-month basis. After filling out a few fields and answering a few quick questions about your finances, the program should help you figure out your filing status, if you are eligible for the tax return, and help you estimate how much credit you could deduce this way.
Are Health Insurance Premiums Tax Deductible?
This is one of the more delicate questions on the minds of self-employed people and it is related to health insurance premiums. Some of the beneficiaries fear that they might not be eligible to deduct their tax if they have a premium insurance. The answer to this concern is that you don’t have to worry: you can deduct your health insurance premiums as long as you do so on a monthly basis. You can only deduct premium insurance from a few months back if you are able to prove that neither you nor your spouse were eligible to participate in a health insurance plan subsidized by an employer.
You enter the tax write-off which also allows you to deduct health insurance premiums on page 1 of the 1040 Form. This is a form that is routinely used to fill out returns for self-employment taxes. Using the same form, you can write off some of the amount you pay for health insurance. Follow the link above to the IRS’s assistant program to find out more.