- Kenneth D. Eichner, P.C.
Medicare Premiums & The Self Employed
Self-employed individuals can deduct their Medicare premiums above the line.
Medicare premiums paid by a self-employed individual are included in the deduction for health insurance on Schedule 1 of the 1040. This also applies for partners, provided the partnership reimburses the partner for the premiums and the amounts are reported as guaranteed payments that are taxed as income. Similar rules apply to S corporation shareholders who own more than 2% of the firm when the shareholder pays the premiums and then gets reimbursed by the S firm. Note that the premiums must be included as wages on the shareholder’s W-2 form.
Now for the tricky part: Are a spouse’s Medicare premiums treated the same?
Some tax pros say no.
Premiums paid by a spouse of a self-employed person likely can’t be claimed on Schedule 1 unless the spouse is also self-employed. IRS Publication 535 says that Medicare premiums are required to be paid in the name of the self-employed person or the business to qualify for the Schedule 1 deduction. A spouse’s Medicare premiums can be included in medical expenses and deducted on Schedule A to the extent total medicals exceed 7.5% of AGI, and if the couple itemizes.
Note the issue is murky, and other tax practitioners have a different view.
Kiplinger Washington Editors, The Kiplinger Tax Letter, Sept. 17, 2021. Vol. 96, No 19: page 2