Question: In past years, Lisa has claimed the self-employed health insurance deduction on her Form 1040, U.S. Individual Income Tax Return, for her Schedule C (Form 1040), Profit or Loss From Business, dog grooming business. She qualifies for Medicare this year and wonders if payment of her Medicare premiums for Parts A, B, C and D may also qualify as deductible health insurance premiums. What do you tell her?
Answer: Yes, Lisa’s voluntary Medicare premiums qualify as self-employed health insurance, which she may deduct. The Form 1040 instructions (pages 89-90) add a nuance indicating that Medicare premiums paid voluntarily in the taxpayer’s name “to get health insurance that’s similar to qualifying private insurance” can be used to figure the deduction. Most people do not pay for Part A premiums; the coverage derives from Medicare tax deductions from employment. However, it is possible to purchase Medicare Part A coverage with monthly premiums. Further clarification of this issue is in a 2012 Chief Counsel Advice Memo, [CCA201228037], which affirms that Medicare is “medical care” and is similar to private health insurance premiums.
The CCA includes “all parts” of Medicare as deductible. For example, If Lisa had a spouse or a dependent under age 27, the coverage that extended to them is deductible as well. If Lisa failed to deduct the premiums on her current year’s return, she could even amend a return (assuming the year in question is still open) to claim a refund.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.