New Health Insurance Premium Deduction

Until now, a self-employed individual’s federal income tax deduction for health insurance premiums could not be deducted as an expense when calculating his or her self-employment tax liability. However, for 2010, a provision of the 2010 Small Business Act allows the health insurance premium deduction as an expense against computing self-employment tax. This will reduce the self-employment tax liability in addition to reducing the federal income tax bill. This provision can be a fairly big deal, especially if your health insurance deduction is significant. By reducing the after-tax cost of health insurance coverage, this provision makes it easier for the self-employed individual to afford coverage or increase existing coverage.