Self-Employed Health Insurance Deduction

You may be able to deduct the amount you paid for health insurance for yourself, your spouse, and your dependents if any of the following applies.

• You were self-employed and had a net profit for the year.
• You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
• You received wages in 2008 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation may be shown in box 14 of Form W-2.

The insurance plan must be established under your business. If you are a more-than-2-percent shareholder in an S corporation, the plan must be established by the S corporation. A plan is established by the S corporation if (a) the S corporation makes the premium payments for the policy in 2008 or (b) you make the premium payments and furnish proof of payment to the S corporation and then the S corporation reimburses you for the premium payments in 2008. You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 in 2008 and you also report the premium payments or reimbursements as wages on Form 1040, line 7.