Deductibility of Spousal Medicare as SEHI

[FREDNH]

Self -employed taxpayer and retired spouse both have individual Medicare insurance, Medicare is deducted monthly from each spouse's Social Security payment. In addition to the self employed taxpayer claiming Medicare deduction as SEHI above the line on Form 1040, can the taxpayers claim the spouse's Medicare payment as SEHI, even though she is not self employed?

[Lion]

Yes. (It seems against everything the IRS usually says.) There was a Memo or other publication about it a few years ago, clarifying the set of circumstances. If I can find it, I'll post it. Or, someone will post it, I'm sure!

Found it: https://www.irs.gov/pub/irs-wd/1228037.pdf

[TaxGuyBill]

I don't want to get into an argument, but I'll just post the pertinent paragraphs in CCA201228037 that Lion had referred to:


ISSUES 3. May Medicare premiums be deducted under section 162(l) for the coverage of a self-employed individual’s spouse, dependent or child (as defined in section 152(f)(1) who as of the end of the taxable year has not attained age 27)?

CONCLUSIONS 3. 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).

Medicare is insurance that constitutes medical care under section 162(l). Therefore, all Medicare premiums are similar to other health insurance premiums and can be used to compute the deduction under section 162(l). This rule also extends to Medicare premiums for coverage of a self-employed individual’s spouse, dependent, or child (as defined in section 152(f)(1) who as of the end of the taxable year has not attained age 27).

https://www.irs.gov/pub/irs-wd/1228037.pdf

[ATSMAN]

Medicare is insurance that constitutes medical care under section 162(l).

Based on that reasoning, it does not appear to be illogical IMHO. If a self employed can deduct SEHI for private insurance that covers him and wife why not with Medicare.

[New York Enrolled Agent]

Based on that reasoning, it does not appear to be illogical IMHO. If a self employed can deduct SEHI for private insurance that covers him and wife why not with Medicare.

Let me say as Feduke notes there is disagreement among tax pros on this. But I don't think your last question may work. Why?

Because in the situation you describe there are family plans - Medicare B is an individual's plan. The language in the CCA document

This rule also extends to Medicare premiums for coverage of a self-employed individual’s spouse, dependent, or child

is basically open to question. There are no such similar private insurance premiums - Medicare B doesn't provide family coverage. CCAs always carry the caution - "not to be cited".

TGB posted an important snip including

If all the requirements of section 162(l) are satisfied,

(A) Dollar amount.-No deduction shall be allowed under paragraph (1) to the extent that the amount of such deduction exceeds the taxpayer's earned income (within the meaning of section 401(c)) derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established
I gather the spouse has no earned income from the business - is §162(l) satisfied???

Like I said - two schools of thought on this issue. IRS should provide more guidance. In the interim Frednh has to make a decision.

[JON]

Deduct it -

[DoubleO]

I don't want to get into an argument, but I'll just post the pertinent paragraphs in CCA201228037 that Lion had referred to:


ISSUES 3. May Medicare premiums be deducted under section 162(l) for the coverage of a self-employed individual’s spouse, dependent or child (as defined in section 152(f)(1) who as of the end of the taxable year has not attained age 27)?

CONCLUSIONS 3. 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).

Medicare is insurance that constitutes medical care under section 162(l). Therefore, all Medicare premiums are similar to other health insurance premiums and can be used to compute the deduction under section 162(l). This rule also extends to Medicare premiums for coverage of a self-employed individual’s spouse, dependent, or child (as defined in section 152(f)(1) who as of the end of the taxable year has not attained age 27).

https://www.irs.gov/pub/irs-wd/1228037.pdf

Except that in the third paragraph from the end of the CCA, the last sentence states, "Sole proprietors must pay the Medicare premiums directly." For most people, the Medicare premium for the spouse is withheld from the spouse's Social Security. I don't think this would qualify as being paid directly by the sole proprietor.

[Burke]

Except that in the third paragraph from the end of the CCA, the last sentence states, "Sole proprietors must pay the Medicare premiums directly." For most people, the Medicare premium for the spouse is withheld from the spouse's Social Security. I don't think this would qualify as being paid directly by the sole proprietor.

I have one MFJ client whose spouse does pay her Medicare Part B separately by check. It is not deducted from her benefit. I never have figured out why it is done that way.