Writing off self-employment health insurance

Dear Tax Talk,
My question concerns the deductibility of health insurance premiums for the part-time small business owner. As a part-time employee and part-time sole proprietor, at what point do my health insurance premiums (paid entirely by me, NOT my employer) become 100 percent deductible as a business expense? -- Walt

Dear Walt,
If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, up to 100 percent of the amount paid for medical and qualified long-term care insurance on behalf of yourself, your spouse and dependents.

The insurance plan must be established under your trade or business, and you cannot take this deduction to the extent that the amount of the deduction is more than your earned income from that trade or business. For example, if you earned $5,000 from your part-time sole proprietorship and paid $6,000 in health insurance premiums, your deduction is limited to $5,000 less the deduction on line 28 of Form 1040 for half your self-employment tax and less any SEP contribution related to the business.

You may not take this deduction for any month in which you were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer. For example, you cannot take the deduction for payroll deductions for matching health insurance contributions.

You take this deduction on Form 1040, line 29. If you itemize your deductions and do not claim 100 percent of your self-employed health insurance on line 29 (for example, because of the limitation on income), include any remaining premiums with all other medical care expenses on Schedule A (Form 1040), subject to the 7.5 percent of adjusted gross income limit.