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Per IRS Instructions for Form 1040 and 1040-SR, starting on page 87:

Line 16

Self-Employed Health Insurance Deduction

You may be able to deduct the amount you paid for health insurance for yourself, your spouse, and your dependents. The insurance can also cover your child who was under age 27 at the end of 2020, even if the child wasn't your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child (defined in Who Qualifies as Your Dependent in the Instructions for Forms 1040 and 1040-SR).

One of the following statements must be true.

  • You were self-employed and had a net profit for the year reported on Schedule C or F.
  • You were a partner with net earnings from self-employment.
  • You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
  • You received wages in 2020 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.

The insurance plan must be established under your business. Your personal services must have been a material income-producing factor in the business. If you are filing Schedule C or F, the policy can be either in your name or in the name of the business.

If you are a partner, the policy can be either in your name or in the name of the partnership. You can either pay the premiums yourself or your partnership can pay them and report them as guaranteed payments. If the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premiums as guaranteed payments.

If you are a more-than-2% shareholder in an S corporation, the policy can be either in your name or in the name of the S corporation. You can either pay the premiums yourself or the S corporation can pay them and report them as wages. If the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you. You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 in 2020 and you also report the premium payments or reimbursements as wages on Form 1040 or 1040-SR, line 1.

But if you were also eligible to participate in any subsidized health plan maintained by your or your spouse's employer for any month or part of a month in 2020, amounts paid for health insurance coverage for that month can't be used to figure the deduction. Also, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2020, don’t use amounts paid for coverage for that month to figure the deduction.

On page 88:

CAUTION! A qualified small employer health reimbursement arrangement (QSEHRA) is considered to be a subsidized health plan maintained by an employer.

Example. If you were eligible to participate in a subsidized health plan maintained by your spouse's employer from September 30 through December 31, you can't use amounts paid for health insurance coverage for September through December to figure your deduction.

Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer can't be used to figure the deduction.

See IRS Publication 535 Business Expenses for additional information.

To enter the self-employed health insurance deduction information within your TaxAct® 1040 return:

Schedule C Statutory Employee

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click Income and expense for statutory employees.
  3. Click Edit to review a form already created, then continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Business Income - Income Summary, click Expenses.
  5. On the screen titled Business Income - SE Health Insurance, click Yes.

Schedule C

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click Business income or loss from a sole proprietorship.
  3. Click + Add Schedule C to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled Great! Let's get started on expenses for this business, click Enter expenses.
  6. On the screen titled Would you like to complete the self-employed health insurance deduction worksheet for this business?, click Yes.

Schedule F

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click Farming income or loss.
  3. Click + Add Schedule F to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled Farm Income - SE Health Insurance, click Yes.

Partnership

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click Partnership income (Form 1065 Schedule K-1).
  3. Click + Add Partnership Schedule K-1 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled Partnership - Schedule K-1 Information, check Box 13 - Other deductions, then click Continue.
  6. On the screen titled Partnership - Other Deductions, click Yes.
  7. On the screen titled Partnership - Other Deductions - Codes K-O, enter the 13M - Health insurance premiums (Amounts paid for medical insurance) amount, then click Continue.
  8. On the screen titled Partnership - Self-Employed Health Insurance, click Yes.

S Corporation

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click S Corporation income (Form 1120S Schedule K-1).
  3. Click + Add S Corporation Schedule K-1 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled S Corporation - Self Employed Health Insurance, click Yes.

S Corporation (No Schedule K-1 received)

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Wages and Salaries in the Federal Quick Q&A Topics menu to expand, then click Wage income reported on Form W-2.
  3. Click + Add Form W-2 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled We'll start with your W-2, enter your employer's EIN in Box B - Employer Identification number (EIN), then click Continue.
  6. On the screen titled W-2: Enter Taxpayer's/Spouse's employer information, enter your employer's information, then click Continue.
  7. On the screen titled W-2: Enter Taxpayer's/Spouse's information, click Yes, there is something in Box 14, then click Continue.
  8. On the screen titled W-2: Enter Taxpayer's/Spouse's information from Box 14, enter the Box 14 - Description and the Box 14 - Amount from your W-2, then click Continue.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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