Case Study 1: Self-Employed Health Insurance Deduction
Carson is single and has his own business. During the year, he paid qualified health insurance premiums of $3,000. His Schedule C shows a profit of $5,500 and his self-employment tax deduction is $389 for a net of $5,111 ($5,500 – $389). The full $3,000 premium paid is deductible as self-employment health insurance because it is less than the net profit.
The self-employed health insurance deduction is limited to the net self-employment profit shown on the return reduced by the deduction for one-half of the self-employment tax.
Note: Calculations with premium tax credit remain out of scope with respect to the self-employed health insurance deduction.