How Self-Employed Maximize Health Insurance With Tax Benefits
This year ,the recession has a brought with it a new class of worker, call it the 'accidental entrepreneur.' These are people who, after being laid off from regular jobs, created their own. For the self-employed, benefits come out their own pocket, including health insurance. As tax time rolls in, independent workers can take advantage of numerous tax deductions.
There are many reasonable health insurance options to explore for the ‘accidental entrepreneur’ and the self-employed. Each option is tax deductible as well. COBRA, of course is one of the easier options to consider. COBRA is an extension of one’s previous employer-paid health insurance. This option, however, is ofter costlier than applying for individual insurance. It does ensure that a lapse of coverage does not occur.
However, COBRA is not always the best option as far as taxes go. COBRA make actually change taxable income especially if one has signed up for the COBRA subsidy making COBRA more affordable. Taxable income may increase.
The Health Savings Account is a medical savings account available to Americans enrolled in the High Deductible Health Plan. One simply contributes a monthly amount and can use the account for medical expenses. The money in the account is not subject federal income tax either. For tax purposes, when using a Health Savings Account, it’s a good idea to deduct one’s contributions to the limit as per federal guidelines.
Another compelling idea is to deduct medical expenses and insurance as a business expense. This is only possible if one paid out of pocket for health insurance and were not eligible to enroll in an employer sponsored health plan. Coverage for family members can be deducted as well.
Itemizing medical expenses goes a long way as well. If medical expenses exceeds 7.5 percent of adjusted gross income, the excess may be deducted. Medical expenses such as medications, copayments and deductibles are allowed.
The number of self-employed workers in the United States has increased to nearly 6 percent up from 2.5 percent in December. With such an increase, it is more important than ever for many to get their tax returns in and tax money out. Be sure to maximize every deductible to get the best return.