Self employed tax qustions

[artp]

Married taxpayer (age 75) retired in Dec 2022 from his employer who provided 75% health insurance (medical and drug) coverage as a tax-free benefit-employee paid 25% through payroll deduction. For retirees the company will reimburse him 75% for Medicare part B and D premiums for taxpayer and wife.  Taxpayer has always operated SchC business (no employees). He also has supplemental medical insurance for dental and vision and tax qualified LTC for himself. 

 

Question 1. Is 25% portion for health insurance deductible (line 17) on 1040?

Queston 2. Are the supplement insurance premiums also deductible (line 17)?

Question 3. Does he have to have a written plan in place under 105b) or 106(a) to take the supplemental medical and/or LTC deductions?

Question 4. If his wife gets a LTC policy can he deduct those premiums?

[Lee B]

Generally retiree health insurance benefits are not taxable. But in this case the reimbursements are not part of a group plan so the reimbursements are probably taxable income. Second SEHI is limited to Schedule C Taxable Income. The OP doesn't mention whether the clients Schedule C makes a profit. Also, how old is his wife is she still working and does she have access to group health benefits?

 

[DANRVAN]

4 hours ago, artp said:

Question 1. Is 25% portion for health insurance deductible (line 17) on 1040?

Are you referring to 2022 or 2023?

 

4 hours ago, artp said:

retired in Dec 2022 from his employer who provided 75% health insurance (medical and drug) coverage as a tax-free benefit-employee paid 25% through payroll deduction. For retirees the company will reimburse him 75% for Medicare part B and D premiums for taxpayer and wife.  Taxpayer has always operated SchC business (no employees).

So he was both an employee and self-employed until Dec 2022?

[artp]

The information is for 2023. Sch C net income is projected at $20,000. The wife is 66 retired and on Social Security. The taxpayer was employed in 2022 and always had a Sch C side business.

[artp]

To clarify the medical insurance deduction is limited one line 17 is limited to the 25% not reimbursed by the former employee. Correct? It is my understanding that the 75% reimbursement is under Sec 105 plan of the former employer so it should not be reportable or taxable to the retired employee. Correct? If the employer would issue a 1099 for the 75% reimbursement, how should that be handled on taxpayer's return?

What about the deductibility of LTC premiums?

[DANRVAN]

3 hours ago, artp said:

Sch C net income is projected at $20,000.

Then med insurance premiums up to that amount including LTC and medicare (but see below)  are deductible. See section 162(l).

 

2 hours ago, artp said:

the 75% reimbursement is under Sec 105 plan of the former employer so it should not be reportable or taxable

If under a sec 105 plan, then not taxable.

However,  the medicare reimbursement would be considered a subsidized health plan; therefore the remaining 25% would not be deductible as SEHI, but that does not effect supplemental or LTC.

3 hours ago, artp said:

always had a Sch C side business.

 I am not aware of anything in the code that would prevent a new retiree from starting up a part time business and make just enough to cover his and hers health insurance premiums.

[DANRVAN]

For 2022 he should have been able to deduct the following if each item not eligible for employer plan: LTC both him and wife; wife's medicare; and wifes supplemental.

[TexTaxToo]

17 hours ago, DANRVAN said:

For 2022 he should have been able to deduct the following if each item not eligible for employer plan: LTC both him and wife; wife's medicare; and wifes supplemental.

I don't think this is correct.  In 2022, he was employed and eligible for a subsidized plan from his employer. Under 162(l)(2)(B), he cannot take the deduction for any health insurance ("Paragraph (1) shall not apply") - that would include the wife's medicare and supplemental.  LTC is considered separately, so LTC is deductible if there is no eligibility for LTC from his employer.

In 2023, he was not employed.  A former employer is not an "employer of the taxpayer".  Therefore all the unreimbursed health insurance and LTC would be deductible.

[DANRVAN]

1 hour ago, TexTaxToo said:

19 hours ago, DANRVAN said:

For 2022 he should have been able to deduct the following if each item not eligible for employer plan: LTC both him and wife; wife's medicare; and wifes supplemental.

I don't think this is correct

You are correct, only LTC can be taken separately.