Meet your evolving needs with three integrated business lines in one professional services firm.


Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.

Tax Watch logo

The IRS Chief Counsel has advised that a self-employed individual who is an employee under Code Sec. 401(c)(1) can deduct Medicare insurance premiums when computing adjusted gross income.

How the Self-Employed Can Deduct Medicare Premiums

  • 7/25/2012

How the Self-Employed Can Deduct Medicare Premiums

The IRS Chief Counsel has advised that a self-employed individual who is an employee under Code Sec. 401(c)(1) can deduct Medicare insurance premiums when computing adjusted gross income. Self-employed individuals include a partner in a partnership, a 2 percent shareholder in an S corporation, and a sole proprietor.

The Chief Counsel also advised that:

  • All Medicare parts, not just Part B, are similar to other health insurance premiums that provide medical care coverage under Code Sec. 162(l).
  • A self-employed individual can pay the premiums directly and be reimbursed by the employer, or the premiums may be paid by the employer (the partnership or S corporation). Sole proprietors must pay the premiums directly.
  • Medicare premiums can be deducted for coverage of the self-employed individual’s spouse, dependent, or child (assuming the child is under the age of 27).
  • Self-employed individuals who failed to deduct Medicare premiums for prior years may file an amended return to claim the deduction.

The Chief Counsel noted that the deduction cannot exceed the individual’s earned income from the trade or business for which the medical plan is established. A deduction also is not allowed if the employer of the individual or of the individual’s spouse provides a subsidized health plan. The insurance arrangement must comply with Notice 2008-1. If the premiums are paid by the employer, the premium amounts must be included in the gross income of the self-employed individual.

©2012 CCH. All Rights Reserved.