Self-employed health insurance premium override

[bnb]

In prior years Lacerte had an input box on Adjustments Screen 24 under SE Health Insurance for SE health deduction Override.  This input box has disappeared from the 2023 Lacerte Individual Tax Program.  Does anyone know why and how to work around this?  Or is it a Lacerte programming error?

[sjrcpa]

Why do you need to override?

[bnb]

I have a minister's wages and housing allowance that are self-employment income subject to SE tax.

[bnb]

The minister has self-employed health insurance premiums and no business to tie them to.  I've tried entering Net Earnings from self-employment but that didn't help.  The diagnostic says the deduction was disallowed because the taxpayer has no self-employment income.

[TaxGuyBill]

Is there a screen for Form 7206?

The Self Employed Health Insurance deduction changed this year from being calculated on a worksheet to being on Form 7206.  I'm wondering if Lacerte moved it.

[bnb · Accepted solution]

We talked to Lacerte and there is no override for SE health insurance this year.  Their solution was to enter the amount of wage and housing allowance on Adjustments Screen 24 as Net Earning Adjustments, Net profit of business under which plan is established.  This generates the premium deduction on Line 1 of Form 7206, but I don't think that's right.  Line 1 is for the "total amount paid in 2023 for health insurance coverage established under your business".  These were Medicare premiums and the minister doesn't have a "business" per se.  There is no line on Form 7206 that is specific to ministers.

[TaxGuyBill]

I am looking at your question a bit closer and am wondering if anything needs to be done at all. But I DON'T do minister returns, so I could be completely wrong.

Isn't a minister an employee for income tax purposes (and self-employed for purposes of Social Security and Medicare tax)?

The Self Employed Health Insurance deduction is only for income tax purposes.  As an employee for income tax purposes, you shouldn't even enter health insurance, should you?

But as I said, I don't do minister returns, so I could be completely wrong.

[bnb]

Yes, you're correct.  Minister's have dual tax status as an employee and self-employed.  They pay income tax on wages and self-employment tax on wages and the housing allowance they receive.  Health insurance premiums up to the amount of their net self-employment qualifies for the self-employed health insurance adjustment.

[bnb]

From IRS Pub 517 (2023):

Health Insurance Costs of Self-Employed Ministers

If you are self-employed, you may be able to deduct the amount you paid in 2023 for medical
and dental insurance and qualified long-term care insurance for you, your spouse, your dependents, and any child you may have who, as of the end of the tax year, had not attained age 27.

If you qualify, you can take this deduction as an adjustment to income on Schedule 1 (Form
1040), line 17. See the Instructions for Form 1040 to figure your deduction.
The following special rules apply to the self-employed health insurance deduction.
• You can't take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction.
• You can't take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer.
• The deduction can't exceed your net earnings from the business under which the insurance plan is established. Your net earnings under this rule don't include the income you earned as a common-law employee (discussed earlier) of a church.

[sjrcpa]

" Your net earnings under this rule don't include the income you earned as a common-law employee (discussed earlier) of a church."

Didn't you say he was an employee of the church?

Caveat: I don't do ministers either.

[TaxGuyBill]

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@bnb wrote:

  Health insurance premiums up to the amount of their net self-employment qualifies for the self-employed health insurance adjustment.

Your net earnings under this rule don't include the income you earned as a common-law employee (discussed earlier) of a church.

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But they aren't self-employed for income tax purposes.  So why does an income tax deduction apply?

[bnb]

No, he's a minister for a non-profit organization.  So, interesting take.  I read that as the net earnings under this rule don't include the income earned as a common-law-employee in the calculation of the amount that can't exceed net earnings.

[qbteachmt]

"These were Medicare premiums and the minister doesn't have a "business" per se."

Aren't you using Sched C for the minister's fees and offerings that are not part of W2 wage reporting? That's why they qualify for the health insurance deduction; not as an employee, but for the Medicare costs, on Schedule 1 line 17.

https://www.irs.gov/instructions/i7206

[bnb]

There is no Schedule C because he didn't receive any compensation other than wages and housing allowance.