As more and more people are in business for themselves the question of whether or not a statutory employee deduct health insurance premiums arises. The answer is yes, but there are conditions that must be met.
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A statutory employee is a person who is self employed but, when it comes to tax issues and the Internal Revenue Service, is considered an employee. Some examples are those who work out of their home, corporate officers, traveling sales people, and commissioned workers. The following article provides additional information on statutory employee health insurance.
What regulations do statutory employees need to meet in order to deduct health insurance?
Statutory employees are unique because they are considered self-employed when it comes to income tax yet employed for medical tax and social security. Because of this, statutory employees can deduct 100% of health insurance premiums for themselves and their dependents, if they meet qualifications. The main qualification is that the statutory employee does not have a spouse who receives health insurance through an employer.
If a spouse does receive health insurance through an employer, it is considered optional for the statutory employee to get their own health insurance coverage, so premiums are not deductible. Even if is it less expensive for the statutory employee to get their own plan instead of being added on to their spouse’s plan, the premium amount will not be deductible.
This can be frustrating but, according to federal law, it is the only option when it comes to deductibles. When dealing with a divorce situation with dependents, each state has its own laws governing the regulation of deducting premiums.
Another regulation to be aware of is a change in status. If during a calendar year, you lose your statutory employee status, your health insurance premiums can only be deducted through the month of your change in status.
This means, for example, that if your status changes on June 14th, you can deduct health insurance premiums from January 1st through June 30th. Even if your insurance continues through COBRA or other means past your change in status, your deduction based on being a statutory employee ends the last day of the month of the change in status.
This doesn’t mean that you won’t be able to deduct premiums when covered under another type of health insurance. Individuals with traditional health insurance plans, employee based plans, organizational based plans, and private health insurance polices can all deduct medical expenses for health related costs including premiums. Again, the main regulation is that the coverage is necessary and not optional. However, a tax professional can help you understand the ins and outs of deductions.
Health insurance options for the self employed
Self employed individuals have a lot of options available. There are many insurance companies that specialize in providing insurance for the self-employed. Self-employed insurance rates are more costly then traditional health insurance, but still cheaper than paying all medical expenses out of pocket.
Self employed insurance has come a long way as more and more individuals are focusing on self-employment options. Self employment insurance offers the same type of coverage as traditional insurance such as access to hospitals, choice of doctors, and prescription coverage.
Another option for self employed individuals is government assisted health insurance. This is a temporary option for individuals who are just beginning a business and may not have any revenue in the beginning stages of starting a business. Medicaid and other partially funded government run programs can provide affordable, adequate health insurance until a business takes off.
Though Medicaid is a federal program, each state has its own way of running and regulating Medicaid. So you will need to find out what your state requires and how to apply for coverage. Each state has different requirements concerning income levels, family size, and coverage options. Though not everyone likes the idea of being covered by a government run program, it is a good temporary solution.
Whether looking for health insurance as a statutory employee or as an individual looking for an affordable plan, the internet is a great place to start. Going to many different websites can be time consuming, Another option is using an online insurance comparison tool to compare rates and quotes from several companies. This type of tool can save you time and money. Once you have narrowed down your options, you can contact individual companies, if you have additional questions.
Use the free health insurance quotes tool on this page and start saving money on health insurance now!