A Tax Break For Health Insurance

Good news for owner-operators who buy their own health insurance: You can deduct the entire portion on next year’s income tax.

Good news for owner-operators who buy their own health insurance: You can deduct the entire portion on next year’s income tax. That’s not a credit – a full rebate – but it is an improved tax break. “It’s about time,” says Perry Wiseman of Truckers Accounting Service in Omaha, Neb. For 2002, only 70 percent was deductible, he says, and for at least a few years before then, only 60 percent could be claimed.

Here are a few qualifications, including one curveball:

  • You must show a profit on your operation. New truck buyers who end up with a bad financial year and plan on aggressively depreciating that expensive new equipment to zero out income should take note.
  • The deduction is not available if you were eligible for a spouse’s employer-subsidized plan.
  • Before you start spending the hundreds of dollars you hope to save, consider this: Your total medical expenses (not limited to insurance premiums) must exceed 7.5 percent of your adjusted gross income before you start deducting them. If your AGI is, say, $40,000, that means you get no healing salve from your doctor bills and insurance premiums until you’ve bled $3,000. For that reason, as well as the relative lack of health insurance policies held by owner-operators, “Very few people qualify,” says Russell Fullingim, of Truckers Financial Service, Corning, Calif.
  • If deducting 100 percent of health premiums still doesn’t make insurance affordable for you, ask your accountant about getting a less expensive, high-deductible policy and establishing a Medical Savings Account. An MSA allows you to save money tax-free, with earnings, to spend on those high deductibles.

    This latest tax break is hardly a cure-all for health costs. But for the owner-operator who’s running with no plan for health expenses, it can be a starting point for helping to control the costs you will inevitably incur.


    HEALTH COVERAGE ALTERNATIVES

    If you have a pre-existing or other high-risk condition and cannot afford traditional health policies, consider these options:

  • Your state insurance department can tell you if your state has a pool offering uninsured coverage to high-risk residents. Visit www.naic.org.
  • Accountant Russell Fullingim advises many of his clients to use a plan allowed under Section 105 of the Internal Revenue Code in which they employ their spouse, provide health insurance and net greater reductions in federal and state income taxes and self-employment taxes. Call (800) 328-2937.
  • Programs such as Care Entrée help clients by securing the negotiated rates that large insurance companies receive from doctors and hospitals. Call (972) 522-2000 or visit www.careentree.com.
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