February 26, 2013

Deducting a Minister's Health Insurance Premiums

Question:

Can a minister with a valid Form 4361, deduct health insurance premiums that he paid on line 29 of form 1040?

Answer:

Ministers use Form 4361 to claim exemption from tax on self-employment income. A minister is an employee in every respect, except for purposes of the self-employment tax. The health insurance premium deduction relates only to self-employed business owners and is not available for employees.

Form 1040 Instructions state that in order to deduct insurance premiums on line 29 of Form 1040:

"One of the following statements must be true.
  • You were self-employed and had a net profit for the year.
  • You were a partner with net earnings from self-employment.
  • You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
  • You received wages in 2012 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.
The insurance plan must be established under your business. ... If you are filing Schedule C, C-EZ, or F, the policy can be either in your name or in the name of the business."

However, the minister may deduct the health insurance premiums on Schedule A.

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