As you prepare to file your 2010 income tax return, there are some new rules that might help you minimize the amount you owe. If you qualify, be sure to take advantage of this opportunity.
If you are self-employed, any premiums you pay for health insurance are fully tax-deductible, and have been for several years. But in previous years that deduction didn’t affect the tax you pay for Medicare and Social Security. Under a new federal law, the self-employed can reduce earned income subject to self-employment taxes on their 2010 returns by subtracting their health-insurance premiums first.
So, for example, if your 2010 income was $80,000 and you paid $10,000 in healthinsurance premiums, you’ll owe Medicare and Social Security tax on only $70,000. “Deductible premiums include those paid for coverage of a spouse and for children who had not attained age 27 by year-end 2010,” notes Genevia Gee Fulbright, a CPA in Durham, N.C.
This tip is from an article that appeared in the February 2011 Consumer Reports Money Adviser.