We are a coalition of small business organizations representing millions of small business owners dedicated to reducing health insurance costs. Our goal is to ensure that the health insurance costs of self-employed business owners are treated equitably by the tax code.
The Legislation
Under the current tax code, the self-employed (sole-proprietors) do not receive a business deduction for their health insurance costs. Corporations and other business entities are able to deduct health insurance premiums as a business expense and thus, forego FICA (Social Security and Medicare) taxes on these expenses. The self-employed do not receive the same tax treatment which forces these businesses to pay an additional 15.3 percent self-employment tax on their health insurance expenses.
In September 2010, the Small Business Jobs & Credit Act (H.R. 5297) was signed into law and included a provision that would the self-employed to take a one-year tax deduction on their health insurance costs when determining payroll tax (self-employment tax.) For additional guidance on this temporary tax benefit for the self-employed, please view the document below:
What You Need To Know About the One-Year Tax Deduction On Health Costs for the Self-Employed.pdf
Additionally, in the 111th Congress, legislation was introduced in both the House of Representatives and U.S. Senate that would eliminate this strong cost penalty on health insurance imposed on the self-employed by providing these businesses with the same tax treatment of health insurance costs enjoyed by other companies. If passed into law, these bills would level the tax playing field for over 22 million self-employed Americans.
Additional Information:
Frequently Asked Questions
What is the self-employment tax on health insurance premiums? How many self-employed pay this tax? Wasn’t there legislation passed into law allowing 100% deductibility of health insurance premiums for self-employed? Learn the answers to these and many more questions with the Frequently Asked Questions sheet.
Health Insurance Deductibility
The SBA Office of Advocacy's Health Insurance Deductibility and Entrepreneurial Survival report submitted by Tami Gurley-Cal examines whether the differential tax treatment of health insurance premiums for entrepreneurs and wage and salary workers affects entrepreneurial activity.
Self-Employed By State
According to 2007 data from the Internal Revenue Service, we can see the number of sole-proprietors (Schedule C filers) by state that would benefit from a self-employment tax deduction on health insurance premiums.
