4

As you may have guessed, I am self-employed and subject to the AMT. When evaluating health insurance plans for my family, I chose a high premium/low deductible plan so that I could take advantage of the self-employed health insurance tax deduction. My expectations were that I would always use up the deductible, and since I typically end up paying about 40% in taxes, I would save that 40% on the premiums part of my monthly health spend.

However, I just realized that for those of us who are subject to the AMT, this may not make sense. Which leads to a 2-part question:

1) Is self-employed health insurance tax deduction allowed under AMT? I was not able to find a definitive answer on my own - too much blog spam on this subject - so I would appreciate it if you could link to an up-to-date, credible source.

2) Generally speaking, does it make sense for a self-employed person to buy a high-premium/low-deductible plan? Assume you are going to use up your deductible and your plan options are identical other than which percentage of the total is the deductible vs the premium, for example:

Option 1:   $1,000/mo premium  +  $2,000/yr deductible  =  $14,000
Option 2:   $750/mo premium    +  $5,000/yr deductible  =  $14,000
Chris W. Rea
  • 31,999
  • 17
  • 103
  • 191
RADA
  • 915
  • 8
  • 15

1 Answers1

1

Since posting my question, I have consulted with a tax accountant. He has confirmed that yes, health insurance premiums are deductible for those who are self-employed, even under the AMT - plus, if you buy into a high-deductible health plan (HDHP) with a Health Savings Account (HSA), you can deduct both the premiums and the HSA contributions. One caveat is that the premiums and the HSA contributions are sheltered from income taxes but not employment taxes. He did agree that an HDHP plan with an HSA is an excellent way to save money for those who are self-employed and subject to AMT.

RADA
  • 915
  • 8
  • 15