Dear Tax Talk,
I am self-employed and have a bike shop. I have been paying my health insurance premiums personally and not through my business. There is no deduction, however, on my taxes, as my medical expenses do not exceed 7.5 percent of my income. Please let me know if paying my premiums through my small business would yield a tax deduction.
As a self-employed individual, if you have "net profits" from your small business that are reported on Schedule C, Profit or Loss From Business, then you should be deducting the health insurance premiums you paid on line 29 of Form 1040 rather than on Schedule A, where there are limitations. It does not matter whether or not you pay them personally or through your business.
However, if your business is showing a loss, you will have to claim the deduction on Schedule A as an itemized deduction, where they are deductible only to the extent they exceed 10 percent of your adjusted gross income. However, if you or your spouse are 65 or older, the 7.5 percent threshold still applies through 2016.
The deduction for health insurance includes medical, dental or long-term care insurance premiums for yourself, your spouse and your dependents. You may want to take a look at your returns for prior years and consider the possibility of amending them and claiming the deduction if that is more beneficial for you.
Thanks for the great question and all the best to you.