A provision in last month’s Small Business Jobs and Credit Act will allow the self-employed to fully deduct health insurance expenses for the 2010 tax year. To qualify the business must be a sole proprietorship, single-member LLC or sole-owner S-corp. Important points of note are as follows:

  • To take advantage of the deduction the self-employed must purchase their own insurance. Relying on a spouse’s coverage or opting to be uninsured is a no-no.
  • The business must pay self-employment tax on income. Those in loss positions lose the benefit of the deduction.
  • The deduction phases out above $106,800 of income.
  • The deduction does not apply to health insurance provided for employees. A separate small business healthcare tax credit including in the healthcare reform legislation from earlier this year may be available. (Information is available here.)