Self Employed Health Insurance

[Kram BergGold]

Today I attended an NCPE seminar. The speaker addressed the situation where a non self employed spouse is paying for medicare, a medicare supplemental policy, LTHC policy, etc. It seems, an important point to deducting by the SE spouse is to comply with Section 162 (l). A key componant is the SE spouse has to pay the expense. This can be done through a reimbursement from one spouse to the other. The speaker went on to say you could try taking the deduction even when the non SE spouse paid the expense but on audit it could prove problematic. Given this, I am a little hesitant to amend returns for this issue. Do you think the reimbursement can occur 1, 2, or 3 years later to solidify the deduction?

[FEDUKE404]

Here we go again

Most people feel the only allowable SEHI expenses are those 1) incurred by the owner of the Schedule C and 2) paid by the owner of the Schedule C.

Trying an end run of the type you mentioned is simply asking for trouble, especially when/if the IRS ever gets around to updating page 18 of Publication 535.

The rules are pretty clear that the self-employed person can deduct *A* policy that also covers a spouse/dependents, but that is a bit different from a policy merely owned/paid for by the spouse/dependent. OBVIOUSLY the spouse pays her own Medicare premiums. How can you possibly say the husband pays those premiums when (at least for Medicare B and D) those premiums are deducted from the gross Social Security benefits of the spouse??

You might have quite a mountain to climb to justify to the IRS why a husband with a Schedule C incurs a "necessary business expense" for the Medicare/insurance premiums of a policy(ies) owned entirely by the spouse.

FE

[Kram BergGold]

Feduke404

In letter ruling 201228037 The IRS said it is ok to deduct the spouse's Medicare B and D if you are in complicance with section 162 (l).

[FEDUKE404]

That darn letter

In letter ruling 201228037 The IRS said it is ok to deduct the spouse's Medicare B and D if you are in complicance with section 162 (l).

This letter has previously been bantered back and forth ad inifinitum on these boards.

Anyone on the TTB boards is WELL aware of its existence.

I fully expect, at some point in time, a clarification saying it was in actuality the spouse of a self-employed person who PAID the Medicare B/D premiums, therefore the self-employed person obviously did NOT pay those premiums, so that the self-employed person has no SEHI adjustment for the Medicare B/D premiums of the wife.

If you remember, there was for some time much "confusion" as to whether ANYONE'S Medicare premiums could be taken as a SEHI adjustment. It took a while for the IRS to resolve that related matter, with people stumbling over "policy in the name of the business" for a Schedule C operation. I anticipate a similar slow-as-molasses-in-January resolution of the spousal Medicare issues.

If the spouse is a partner in a partnership with the spouse, then you might play the game of the partnership paying the premiums via reimbursement blah blah blah. I think that could be a slippery slope.

Otherwise, from the letter you cited:

If all the requirements of section 162(l) are satisfied, Medicare premiums may be
deducted under section 162(l) for coverage of the self-employed individual’s
spouse, dependent or a child (as defined in section 152(f)(1) who as of the end of
the taxable year has not attained age 27).

Unless you truly like amending amended returns, you might want to keep your powder dry until at least the 2012 Publication 535 arrives.

FE

[JohnH]

It's also advisable to back up a bit and determine if the client has tax-deductible medical expenses. If so, then I question whether the marginal benefit of getting the premiums on the front of the return as an adjustment to AGI (rather than on the Schedule A) is really worth the time/risk/research.

[ChEAr$]

It's also advisable to back up a bit and determine if the client has tax-deductible medical expenses. If so, then I question whether the marginal benefit of getting the premiums on the front of the return as an adjustment to AGI (rather than on the Schedule A) is really worth the time/risk/research.

And if push comes to shove, a proprietor can always find enough work for his spouse to do at $20 per hour for 12 hours a month, roughly the costs of her medicare B and medigap coverage. Oh, and Medicare D with prescription coverage. make that $30 an hour then for 4 hours a week.