Serena is a 48-year-old single taxpayer. She operates a small business on the side as a sole proprietor. Her 2024 Schedule C reports net profits of $15,000. Her employer does not offer health insurance. Serena pays health insurance premiums of $7,800 in 2024. Serena also pays long-term care insurance premiums of $1,200 in 2024.
Serena can potentially benefit from deductions related to her health insurance and long-term care insurance premiums. Here's how these can be handled on her tax return: ### Self-Employed Health Insurance Deduction 1. **Health Insurance Premiums**: As a self-employed individual, Serena can deduct her health insurance premiums as an "above-the-line" deduction on her Form 1040. This means she can deduct the $7,800 she paid for health insurance directly from her gross income, reducing her Adjusted Gross Income (AGI). 2. **Long-Term Care Insurance Premiums**: The deduction for long-term care insurance premiums is subject to age-based limits. For 2024, the maximum deductible amount for someone aged 40 to 49 is $850. Therefore, Serena can deduct $850 of her $1,200 long-term care insurance premiums as part of the self-employed health insurance deduction. ### Total Deduction Calculation - **Health Insurance Premiums**: $7,800 - **Long-Term Care Insurance Premiums**: $850 (limited by age-based cap) **Total Deduction**: $7,800 + $850 = $8,650 ### Important Considerations - **Income Limitation**: The self-employed health insurance deduction cannot exceed the net profit from the business. Since Serena's Schedule C net profit is $15,000, she can fully utilize the $8,650 deduction. - **No Double Benefit**: Serena cannot
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