Self-employed health insurance and Medicare (again!)

[Bees Knees]

Maybe somebody needs to write a book on the subject. The problem is once the government creates a new entitlement that people have to voluntarily pay for to get, they don't think of it as an entitlement.

Could you ever buy health insurance in the private market for $1,320 a year at age 65? If not, why? How can the government offer Medicare benefits at such a low price? It is because it is subsidized by the government with other funds. You are only paying a portion of what it costs to provide the benefit. That is called an entitlement, when you qualify for some kind of government subsidized program.

I'm not trying to judge the program as bad. Its simply a fact.

[Gary2]

Just to be clear, the cost of Medicare Part B coverage is a perfectly legitimate Schedule A deductible medical expense, but it's not deductible on 1040 line 29 under health insurance costs for self-employed people, it disqualifies people from the Health Coverage Tax Credit, and mere eligibility disqualifies people from COBRA Assistance (whether or not they actually sign up for it).

[dyne]

I just looked at IRS Pub 535 and on page 18 in the second column near the middle at the word TIP it says "Medicare Part B premiums are not considered medical insurance premiums for purposes of the self-employed health insurance deduction".

Then on the very next line it says: "Take the deduction on form 1040, line 29".

This could be mis-construed as making the Medicare Part B premiums deductible
and to be entered on line 29. I believe line 29 is for OTHER Self-Employed
Health Insurance and NOT fror Medicare Part B premiums.

The words "Take the deduction on form 1040, line 29" SHOULD be inserted in Pub 535
ABOVE the TIP which says that the Medicare B premiums are NOT deductible as SE
health insurance.

[Burke]

A couple of questions that I have never heard asked are.......

1. If it was deductible, would you have to multiply the Medicare B amount by the percentage amount, that SS is taxable ( Max of 85%). Maybe IRS considers the Medicare B to be apart of the 15% that is not taxable.

2. What about the Medicare Supplement that is purchased elsewhere, like AARP. Would that amount qualify?

Yes, good points. Would like to hear comments as well. I do know in the case of my state (which allows a separate deduction for LTC premiums) -- that in the case of those that do itemize on the federal and are subject to the 7.5% haircut with excess medical deductions -- does allow a percentage of the LTC amount based on the amount disallowed. Same principle.

[FEDUKE404]

A tax ??

.....IT IS A TAX. No different than the income taxes you pay. Your Medicare Part B payments are a tax that go into the general fund and can be used for any purpose, including funding the war in Afghanistan.

So, can you please cite a valid reference to support your position that Medicare B insurance premiums are, in fact, a tax?

(If that's the case, then I can move that deduction from Schedule A medical expenses subject to the 7.5% AGI floor to the much more favorable location of "taxes" on Schedule A.)

FE

[Jesse]

So, can you please cite a valid reference to support your position that Medicare B insurance premiums are, in fact, a tax?

(If that's the case, then I can move that deduction from Schedule A medical expenses subject to the 7.5% AGI floor to the much more favorable location of "taxes" on Schedule A.)

FE

I could be wrong, but I don't think he meant it literally.

However, if it is indeed a tax it would be a federal tax, not state or local, therefore you would not be able to deduct it on Schedule A.

[Bees Knees]

I could be wrong, but I don't think he meant it literally.

However, if it is indeed a tax it would be a federal tax, not state or local, therefore you would not be able to deduct it on Schedule A.

Just because it is a tax, it does not make it deductible on Schedule A.

Federal income taxes are a tax - not deductible on Schedule A.
FICA taxes are a tax - not deductible on Schedule A.
Federal excise taxes, such as the federal tax on alcohol, sporting equipment, firearms, and heavy vehicles are a tax – not deductible on Schedule A.
Customs duties are a tax – not deductible on Schedule A.
Federal estate and gift taxes are a tax – not deductible on Schedule A.

The definition of the word "tax" is as follows:

A fee charged ("levied") by a government on a product, income, or activity. If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax. The purpose of taxation is to finance government expenditure.

Medicare Part B payments are charged by the government to obtain medical services. The purpose of Medicare Part B is to finance the government expenditures that reimburse medical providers for services provided.

[FEDUKE404]

Cannot deduct Medicare B payments ???

Medicare Part B payments are charged by the government to obtain medical services. The purpose of Medicare Part B is to finance the government expenditures that reimburse medical providers for services provided.

So does this also mean that for your clients you do not deduct Medicare B "premiums" aka "tax" on line 1 of Schedule A either?

Perhaps I need to notify my software providers of their recurring error on this item.

(I am now totally confused.... )

FE

[Bees Knees]

So does this also mean that for your clients you do not deduct Medicare B "premiums" aka "tax" on line 1 of Schedule A either?

I deduct Medicare Part B (aka "tax") on line 1 of Schedule A because the IRS ruled it is deductible on line 1. Just like I deduct sales tax on line 1 of Schedule A on the purchase of a medical device that was prescribed by a doctor.

[Kram BergGold]

Whoa!

We are dealing about an IRS pronouncemet here. I seem to remember the IRS saying that the basis of stock in a demutualized insurance company was zero. Then along came Fischer and a Court has disagreed. It has been years and we still don't know the answer. No one can say for certain if Medicare B is deductible as self employed health insurance until Congress clarifies, which is not going to happen, or the IRS takes someone to Court. My guess is the IRS is not in a rush to do this as they might lose.

[Burke]

You are right, but until that happens my feeling is you have to go with it as stated. BTW, I am on record as disagreeing with Fischer, which was ridiculous if you know anything about the insurance business, which the judge did not.

[ChEAr$]

I don't think taxability of Social Security is relevant. And I think almost everyone would consider supplemental or "Medi-gap" policies to qualify, regardless of opinion concerning Medicare B.

I agree. Maybe premiums for medicare b aren't deductible under a
company (corporate) play, but I'm hoping that Medigap premiums are.

What say y'all?

[solomon]

..................

The Answer To Your Question Is:

Thank you for using our Email service.

Assuming you meet all the requirements to take the self-employed health insurance deduction, you would be able to use the Medicare Part B Premiums.

The following information is from the 2007 U. S Master Tax Guide (page 356).
Health and Accident Insurance Premiums Amounts paid as self-employment tax or as employee tax for hospital insurance under the Medicare program are not medical expenses. Similarly, the basic cost of Medicare insurance (Medicare A) is not deductible unless voluntarily paid by the taxpayer for coverage.

However, the cost of extra Medicare (Medicare B) is deductible.

Please contact us with any further questions.

[ChEAr$]

..................

But... just who is "us"?

[Bees Knees]

Old news.

The 2007 CCH Master Tax Guide, page 356, did not say you could use Medicare Part B for the self-employed health insurance deduction. It merely says it qualifies for the medical expense deduction on Schedule A.