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View Diary: My soon-to-be unpopular diary on Cadillac insurance (110 comments)

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  •  Fire your tax guy (15+ / 0-)

    Steve, I hate to tell you this but whoever did your taxes screwed up in a big way.  I was also self-employed last year and there are 2 deductions that you seem to have missed.  

    First, every single dollar you paid for health insurance was deductible.  Yes, every single dollar.  I had to pay $1000 per month for crappy health insurance for myself and my husband, and it sure as hell was a $12000 deduction.

    Second, half of the self-employment tax (payroll tax that you have to pay yourself) is also deductible.  

    Look into it and file amended taxes.  You're due some cash back.  (Federal, that is)

    Oh, by the way, head of household isn't applicable just for being married.  Marriage is called a tax penalty by all of the tax preparers I've ever talked to, and there's a reason for it.  You actually pay more in taxes, not less.

    Why children are a deduction is beyond me.  If you choose to have them, you should have to pay for them.  

    •  My tax guy is Turbotax, and I assure you, I (1+ / 0-)
      Recommended by:
      Brooke In Seattle

      plugged in my health insurance premiums, assuming that was worth something. It might have been, but it wasn't worth more than the standard deduction. Are you sure you got a full 12,000 dollar deduction? It sounds like you may have gotten over the 7% "hump" that I seem to recall self-employed health costs having to reach before claiming them does any good.

      •  You are correct that health insurance costs (4+ / 0-)

        not paid for in pre-tax dollars, must exceed 7% of your income to get you any break on your federal tax.  This is a similar owie for me as I cannot pay for my spouse's health insurance in pre-tax dollars due to the gay issue, though my own I can.

        However at least in our state, which is NM, those sub-7% dollars do us quite a bit of good on our state return.

        "The extinction of the human race will come from its inability to EMOTIONALLY comprehend the exponential function." -- Edward Teller

        by lgmcp on Sun Jul 26, 2009 at 03:11:54 PM PDT

        [ Parent ]

      •  TurboTax isn't wonderful, unfortunately (6+ / 0-)


        Take a look at this:

        Line 29

        From what it says, you can deduct the whole thing as long as you were self-employed and had a net profit for the year.  

        The health insurance premiums for us were an enormous part of my income.  Since my husband is disabled and doesn't work it was pretty ugly.

        I've used Turbo Tax previously when I wasn't self-employed and even then it tended to miss things.  

        It might be worth going to a tax professional (H&R Block has that guarantee thing that says you won't pay if they don't get you back money) just to find out what else you might have missed.  If you want more info on what I was able to deduct, send me email and we won't subject the world to it.  :)
        (marian at vex dot org)

        Good luck!

        •  Yep, but again, it's a _deduction_, not an (1+ / 0-)
          Recommended by:
          Brooke In Seattle

          exemption. In other words, what the government does is it adds up all the money that I've made over the year. And then, before it subtracts off ANYTHING for home office, or mortgage, or health insurance, or three-martini lunches, it rakes off 15% (minus a SMALL return that it gives me for being self-employed). My problem mostly is not federal income tax. I owed some income tax, because I did reasonably well last year. My problem is FICA. The government will happily give me a DEDUCTION on my health costs, but because it isn't an EXEMPTION, it doesn't even help unless my total deductions add up to more than my standard deduction in the first place.

          •  okay, but (3+ / 0-)
            Recommended by:
            wader, Kitsap River, steve davis

            here are a couple of scenarios, which we've been in ourselves:

            I used to always carry the insurance, because working for a healthcare company, the plan was generally better than what my spouse (an architect) could get. However, when I was working part time, the cost became quite substantial - about $8000/year was taken out of my paycheck. Yes, it was taken out pre-tax, and the hospital paid part (about $3500, I believe, which was free income in that respect) but if I had not had to pay that I would have had about $5000 more in take home pay. How does that compare to your costs?

            In fact, for some of that time, the spouse got rebated what would have been spent on an individual plan for coverage from the spouse's place of employment, which worked out to about $600/month. But it was taxed. In the end, it was roughly a wash, and we wound up with better insurance. But otherwise the spouse would have been down that amount of income, plus more to cover the family, and out out of pocket expenses would have been quite high.

            Right now, we have insurance through the spouse who is now at a different company. Because the spouse is now in management, the premium costs are covered entirely. However, the plan is a high deductible one, with a $4000 deductible to meet. Now, prior to this year, it wasn't a huge deal, we've been basically healthy and only paid for the kids' physicals and the spouse's. (Me, being a doc, I don't go to the doc.) This year, however, we've had significant health issues and the costs have been quite high - and although some of it has been covered by a flex spending account, most of it hasn't because we've never incurred costs like this before and didn't plan for it (that's what insurance is for, after all...)

            Now, my nice part-time job was eliminated and I had to look for a new job this year. I could have considered my own practice, but the spouse's company is hurting bad. It's half the size it was last year and they've taken a 20% paycut. At the time I was looking I wasn't sure if the spouse would have a job. And because of the health issues we've had in the family this past year, we would be uninsurable at any cost. So I wound up having to take a job that had access to a corporate health care plan in the event that the spouse's company folded, or (what's even more likely, now) that the company can no longer provide health care benefits.

            I don't like the job, it's killing me frankly, but it's what I have to do for now.

            Everything comes with a cost, is my point.

            Now, interestingly, I was talking to the nurse at the office where I am, and she said the cost to the employees for the benefits has gone up 40% in the past year. Her husband is in school, they have kids, she's the only one making any money, and they couldn't afford the increased insurance costs. So they got the kids on CHIP, and she and her husband are flying naked. Here I am, taking the job because of access to insurance, and she's going without because it's too expensive, and her cost would be lower than mine (this company bases the withholding for insurance on the employee's salary, which seems reasonable to me, even though I'm in the top group.)

            By the way, if I have to access that plan, it will be at a cost of about $350/2 weeks, or over $9000/year, yes it will be pre-tax but that will still be a significant drop in our family income. And there will still be deductions and copays.

            It's all just a very ugly situation out there.

            Diversity may be the hardest thing for a society to live with, and perhaps the most dangerous thing for a society to be without - W S Coffin

            by stitchmd on Sun Jul 26, 2009 at 03:52:52 PM PDT

            [ Parent ]

            •  Stitch, I think you've hit on my real beef here, (0+ / 0-)

              which isn't cafeteria plans in general. It's that there have been a couple of diaries today where diarists have acted as though the whole idea of setting some kind of cap on the exemption available for cafeteria-plan health insurance is some betrayal of the middle class. I know different folks have different circumstances, but let's say the cap was set at the "average" family insurance premium, which is some ungodly number--like 12,000 dollars. Is it really just a complete betrayal of the middle-class to say that, for people who are paying more than 12-grand a year for health insurance premiums, the exemption-cap means that the money above the 12,000 will be potentially taxable? To me, that idea just really sticks in my craw.

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