As a self-employed certified tax cat, I make sure to take advantage of every opportunity possible to reduce my taxable income. The health insurance premiums I pay for me and my litter have always worked to bring that number down, but they never did anything to reduce the amount I had to pay in Medicare and Social Security taxes. Until now.
Thanks to a new federal law, self-employed taxpayers who go out of pocket for health insurance will be paying a bit less to Social Security and Medicare.
Here’s how Consumer Reports puts it:
So, for example, if your 2010 income was $80,000 and you paid $10,000 in health insurance premiums, you’ll owe Medicare and Social Security tax on only $70,000. “Deductible premiums include those paid for coverage of a spouse and for children who had not attained age 27 by year-end 2010,” notes Genevia Gee Fulbright, a CPA in Durham, N.C.
Considering how much the cost of health insurance has risen in the last year, every little break helps.
Tax break central: Save when deducting health insurance premiums [Consumer Reports]