Under the current tax code, the inequality faced by the self-employed lies in
the payment of self-employment tax on health insurance premiums. While
corporations are able to deduct health insurance premiums as a business expense
and to forego FICA (Social Security and Medicare) taxes on these expenses, the
self-employed are unable to deduct premiums as a business expense and are
required to pay an additional 15.3 percent self-employment tax on these
expenses.
Legislation introduced in Congress would eliminate this strong cost penalty on health insurance imposed on the
self-employed by removing the requirement that the self-employed claim health
insurance premiums when determining self-employment tax. Thus, if passed into law, these bills would make quality
health care more affordable for millions of Americans who now make up
the majority of working uninsured.
Text of H.R. 3660, the Equity for Our Nation's Self-Employed Act
Additional Information:
Frequently Asked Questions
What is the self-employment tax on health care 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.
Click
here to download the FAQs
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.
Click
here for a copy of the report
Self-Employed By State
According to 2005 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.
Click here for a
chart of Self-Employed by State
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