Missed out on the Federal Self-Employed Health Insurance Credit? Don’t Worry, Missouri will Cover it!
Most self-employed individuals know they are allowed a deduction on their federal tax return for the health insurance they paid. The deduction is for medical, dental or long-term care insurance premiums paid for the self-employed, their spouse and dependents. Self-employed individuals include sole proprietors, farmers, partners with self-employment earnings and 2% or more S corporation shareholders who were paid wages through the corporation. However, there is a catch, you must have net income in order to qualify for this deduction. So if you have a sole proprietorship that was not profitable you miss out on the federal deduction. The deduction is allowed for the lesser of your self-employment income or the health insurance you paid.
But, there is good news for Missouri residents. A little known credit is available in Missouri for the additional federal tax you paid, due to the fact that your health insurance deduction was not allowed. Let’s say if you were able to deduct your health insurance it would have saved you $1500 of federal income tax, but because of the income limitation your deduction or a portion of your deduction was disallowed. In this example, you can claim a $1500 credit in Missouri called the Self-Employed Health Insurance Tax Credit. That is a dollar for dollar reduction of your Missouri tax! Even better news, if you missed this credit on your originally filed return, you can amend your return now to claim the credit! Contact your tax advisor for more details.