Preparing for Taxes - Self-Employed? Don't Miss This Tax Break
If you purchase health insurance and are self-employed, make sure you take advantage of a relatively obscure tax break. Any premiums paid for health insurance can be claimed as a deduction against Social Security and Medicare taxes. The result is a 15% savings on those costs. If you pay $800 per month on health insurance, for example, the deduction could cut your self-employment taxes by over $1,300.
The deduction is tricky to find. On Form SE, write in the deduction on Line 3 on the empty dotted line, noting “health insurance premiums” and the amount you paid for health insurance. That amount is deducted from your self-employment taxes. If you’re in doubt, talk to your accountant but don’t miss the chance to cut your overall tax liability.