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I am helping my daughter do her taxes, and have a question about what deductions are appropriate.

She is on her own, not a dependent anymore but still on my insurance as she's under 26. Her income is a gig-economy mix. i.e. multiple jobs. The W2s are straightforward, but a 1099-NEC opens a can of worms. One job issued this and it represents about 1/4 of her total income. I have limited Schedule C experience, recalling that in the year I filed a Sch C, I was able to take a deduction for my own health care cost.

My question - with a mix of income like this, what is the amount that's allowed to be deducted? I'm thinking some type of pro-rating would be required, but unable to find any guidance. Any independent contractor/ Sch C advice seems to address when that's the only income type. FWIW, when we priced the insurance, we agreed she'd pay for 1/3 the monthly premium and have kept records on this and a few other small expenses this job incurred.

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  • Generally, the forms will explicitly answer that in terms of other numbers entered.
    – keshlam
    Apr 13, 2023 at 14:16

1 Answer 1

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For someone self-employed with a Schedule C business, there is the Self-Employed Health Insurance Deduction (SEHID). This allows you to deduct the amount you pay for health insurance premiums off your taxes, up to the amount of your self-employed income. Publication 535 gives the details.

However, one of the requirements you’ll find in Pub 535 is this:

The insurance plan must be established, or considered to be established, as discussed in the following bullets, under your business.

  • For self-employed individuals filing a Schedule C (Form 1040) or Schedule F (Form 1040), a policy can be either in the name of the business or in the name of the individual.

Because the insurance policy is not established in your daughter’s name or her business, it is not eligible for the SEHID.

You, however, might be able to deduct the insurance premiums on your tax return, depending on your situation, either through itemized deductions, the SEHID (if you have self-employment income of your own), or pre-tax through your employer.

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    So hypothetically, if one spouse is self-employed yet the other spouse (for whatever reason) set up the health insurance with themselves as the primary, it would not be deductible on a married filing joint return?
    – Craig W
    Apr 13, 2023 at 17:46
  • @CraigW I’m not sure about that.
    – Ben Miller
    Apr 13, 2023 at 18:04
  • @CraigW yes, that is correct
    – littleadv
    Apr 13, 2023 at 18:21
  • Thanks. Too late for this year, but will probably choose separate plans for next year. For this, and other reasons. Apr 13, 2023 at 18:26
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    @JTP-ApologisetoMonica Assuming, of course, that she is not getting her insurance pre-tax through an employer:, It's not prorated on a percentage of income, but her SEHID can only be as much as her self-employment income (Schedule C profit). If her self-employment income is more than the premiums, she can deduct all of it. If her premiums are more than her self-employment income, she can cancel out all of her self-employment income with the SEHID, and the remainder of the insurance premium is available for a potential itemized deduction (after the 7.5% floor).
    – Ben Miller
    Apr 15, 2023 at 3:38

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