IRS Changes Its Mind | Tax Tip of the Week | No. 85

Changes on Medicare Premiums as Self-Employed Health InsuranceWith no notice, the IRS changed the wording in its 2010 Form 1040 Instructions. The instructions now say that Medicare B premiums can be used to figure the self-employed health insurance deduction. The 2009 instructions and Publication 535 said  they did not qualify.Example: Mary is a 67-year-old, self-employed real estate broker. Because she's a high income individual and is means tested for Medicare B, Mary pays $4,243 for her 2010 Medicare coverage. Mary also pays $1,200 for Medigap health insurance and $2,900 for long-term care insurance. If she's otherwise qualified, Mary can claim a self-employed health insurance deduction of $8,343. For 2010 only, this amount also reduces her self-employment income for SE tax purposes.Sometimes the rules do change in your benefit.As always, give us a call if you have any questions.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt - the guy behind TTW...until next week.