Self Employed Health Insurance - Spouse has a paid plan for W2 employer

[Judy rocks]

I have a Schedule C with a profit and a spouse with a W2 job who is paying a significant monthly health insurance payment. Can the non W2 employee spouse take these payments by the W2 employee spouse as Self Employed Health Insurance for the deduction?

[Traveling EA]

SE Health Insurance

Doesn't the plan need to be in the proprietors name? Is the insurance that is paid by the W-2 employee already pretax?

[Burke]

There have been reams of posts about this on the board. In the beginning, the answer was No, then the IRS said Yes, now I think it is back to No again. If pretax, definitely No. And I think the rule about not being subsidized by an employer still holds.

[Judy rocks]

not sure

Doesn't the plan need to be in the proprietors name? Is the insurance that is paid by the W-2 employee already pretax?

I'm not sure if the plan needs to be in the proprietors name now. Medicare B & D are deductible possibly even when the non schedule C spouse. I'm not sure if this now opens up the Health Insurance paid by the W2 spouse. The payments by the W2 spouse are pretax money. I hadn't thought about that as being a factor but you are right regular Self Employed Health Insurance is paid with after tax $'s.

[ruthc]

No!

You can read the other threads on this. The answer is NO, the self employed spouse can't use it.

[FEDUKE404]

Answer a definite NO

There have been reams of posts about this on the board. In the beginning, the answer was No, then the IRS said Yes, now I think it is back to No again. If pretax, definitely No. And I think the rule about not being subsidized by an employer still holds.

I don't think the answer to this specific question was EVER "yes."

Even before the "Medicare issue" came into play, for a self-employed individual to take the SEHI adjustment that person could not be covered (and I believe could not even be eligible to be covered??) by any employer insurance plan, including that of a spouse. Those rules have been in place for a L-O-N-G time.

Anything regarding the "pre-tax" issue is totally irrelevant to this discussion.

In the meantime, it would be nice if the IRS would get around to updating Pub 535 to clarify their must current position on Self-Employed Spouse A claiming the Medicare B/D premiums of Spouse B as a SEHI adjustment. They have now said such is not allowed, but then there is the publication and "that letter ruling" and ....

FE

[ddoshan]

I haven't seen that about the non self employed spouses Medicare not being allowed. Where did you notice that. Personally I never quite understood the logic of this in the first place. Could always see the self employed one being able to use Medicare premiums, but not those of his or her spouse also.

[Burke]

I don't think the answer to this specific question was EVER "yes."

Even before the "Medicare issue" came into play, for a self-employed individual to take the SEHI adjustment that person could not be covered (and I believe could not even be eligible to be covered??) by any employer insurance plan, including that of a spouse. Those rules have been in place for a L-O-N-G time.FE

You are correct, sorry I was not clear on the matter. When I said "IRS said "yes" I was talking about the Medicare issue. But a subsidized employer group plan was never really in question.

[ChEAr$]

I have a Schedule C with a profit and a spouse with a W2 job who is paying a significant monthly health insurance payment. Can the non W2 employee spouse take these payments by the W2 employee spouse as Self Employed Health Insurance for the deduction?

If the answer is yes, then you also need to know whether or not the spouse's payments for health insurance are pre tax or not. Now that would make a difference.

[FEDUKE404]

Providing some needed clarification

If the answer is yes, then you also need to know whether or not the spouse's payments for health insurance are pre tax or not. Now that would make a difference.

Please read page 18 of Pub 535 ( http://www.irs.gov/pub/irs-pdf/p535.pdf ), specifically "the policy must be established in the name of...the individual" in the left column, and the "other coverage" section in the right column.

A self-employed person has NEVER been eligible to claim insurance premiums (as a SEHI adjustment to income) that were for a policy OWNED by someone else. (This includes a spouse!) Pre-tax or not....it does not matter for SEHI.

A self-employed person CAN claim premiums (within the usual limitations) for his/her **OWN** policy that also covers a spouse or dependents.

And, what most people frequently overlook, is the additional restriction that a self-employed person can claim no SEHI adjustment if he/she has available medical insurance through his employer, or has available insurance through his SPOUSE'S employer. The fact that the self-employed person may merely choose not to take such medical insurance coverage (his/her own or using coverage available to the spouse) does not allow the SEHI adjustment to income.

These rules have been in place....for a very long time.

FE

[Bees Knees]

A self-employed person has NEVER been eligible to claim insurance premiums (as a SEHI adjustment to income) that were for a policy OWNED by someone else. (This includes a spouse!)

While I agree this is true and agrees with Pub 535, it seems to contradict the statement made in CCA 201228037 which specifically states Medicare coverage for a spouse and dependent and child under age 27 qualifies for the SE health insurance deduction.

I'm not aware of being able to purchase Medicare in your name that also covers a spouse, dependent, and child under age 27. The way I understand it, each person must qualify for Medicare as individuals. Thus, CCA 201228037 seems to add an exception to the "purchased in the name of the self-employed person" rule. Unless I am wrong and you can in fact purchase Medicare for the whole family.

[FEDUKE404]

Medicare is a one-person policy

While I agree this is true and agrees with Pub 535, it seems to contradict the statement made in CCA 201228037 which specifically states Medicare coverage for a spouse and dependent and child under age 27 qualifies for the SE health insurance deduction.

I'm not aware of being able to purchase Medicare in your name that also covers a spouse, dependent, and child under age 27. The way I understand it, each person must qualify for Medicare as individuals. Thus, CCA 201228037 seems to add an exception to the "purchased in the name of the self-employed person" rule. Unless I am wrong and you can in fact purchase Medicare for the whole family.

You are correct - Medicare covers only ONE person, viz the owner.

The CCA you cite has been unofficially changed/retracted, and it would be nice for the IRS to get some more definitive info out there (to include an updated Pub 535 !!). There are several other threads on TTB that address this issue.

Sadly, the Medicare issue was to a certain extent a red herring which was originally dealing with the "policy in the name of the business" issue for a Sch C situation. It makes no more sense for self-employed Spouse A to claim as a SEHI adjustment the Medicare premiums of Spouse B as it would for Spouse A to claim as a SEHI adjustment the medical insurance premiums paid via the spouse's employer.

But many people jumped on the bandwagon (in retrospective error) and starting cranking out Forms 1040X to show Medicare B/D premiums for both spouses as a SEHI adjustment for a single self-employed individual. That dog just will not hunt...and it never should have been let out of the cage by the IRS ruling.

And so it goes....

FE

[DonPriebe]

...

But many people jumped on the bandwagon (in retrospective error) and starting cranking out Forms 1040X to show Medicare B/D premiums for both spouses as a SEHI adjustment for a single self-employed individual. That dog just will not hunt...and it never should have been let out of the cage by the IRS ruling.

But the CCA letter WAS issued, and amended returns ARE being processed in accordance with it, and the IRS has NOT seen fit to revoke it at least at the level of authority at which it was issued. Seems like the dog is not only huntin', he tree'd himself a critter.

[FEDUKE404]

Response to CCA letter

But the CCA letter WAS issued, and amended returns ARE being processed in accordance with it, and the IRS has NOT seen fit to revoke it at least at the level of authority at which it was issued. Seems like the dog is not only huntin', he tree'd himself a critter.

This is where I (should have) left things:

http://forum.thetaxbook.com/showthread.php?21066-SEHI-adjustment-Flight-of-the-Phoenix-edition

It would be nice for the IRS to let us all know. . . . . . .

FE

[Bees Knees]

This is where I (should have) left things:

http://forum.thetaxbook.com/showthread.php?21066-SEHI-adjustment-Flight-of-the-Phoenix-edition

It would be nice for the IRS to let us all know. . . . . . .

FE

Unfortunately, an un-named IRS employee quoted in the Kiplinger newsletter has zero authority. The CCA letter is all we have to go by at this time, which means Medicare paid by the spouse of a self-employed individuals DOES in fact qualify for the self-employed health insurance deduction, even if it is bad tax theory.