Self employed health insurance deduction for minister paying se tax on w2 compensation and has 3 other schedule C forms.

Forum|Forum|6 years ago
December 7, 2019
3 replies
29 views

I'm only getting a small percentage of the health insurance deduction on line 29 apparently because the 1/2 se tax deduction is including the se tax calculated on the w2 wages and the housing allowance. This doesn't seem right to me, i'm thinking that he should get 100% deduction as long as the health insurance does not exceed the 3 schedule Cs less 1/2 the se tax associated with them. Am I thinking right? Thanks in advance for any thoughts on this question.

ProSeries Professional

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Best answer by itonewbie

Ministers are treated as employees in relation to income reported on the W-2, by virtue of meeting the common law employee factor tests, although the Code (and, therefore, the IRS) bifurcates on how minister wages are subject to SE-tax.

While it is possible for ministers to have self-employment income acting in capacities other than as being an employee of the church, for which W-2 is issued, they are employees with regard to wages reported on the W-2 and not "self-employed individuals" as defined under §401(c) and, consequently, not qualify for above-the-line SEHI deduction provided for under §162(l).

Medical insurance with respect to the minister's employment income should, instead, be deducted on Sch A.

T

TaxGuyBill

Level 15

According to the IRS Worksheet (and therefore the ProSeries worksheet called the "Self-Employed Health and Long-Term Care Insurance Deduction Worksheet"), it takes the TOTAL on Line 27 (1/2 SE tax) and then prorates it among the total income of all businesses.
https://www.irs.gov/pub/irs-pdf/p535.pdf#page=22

But the tricky part is Line 5 of that worksheet. It does not specifically state to include the clergy wages. However, I agree with you, that Line 5 SHOULD include the clergy wages, so if you are willing to 'take a stand', you should override Line 5 of that worksheet to add the clergy wages.

R

RANDYBLANKAuthor

Level 3

It's very helpful that you agree with me. Thanks for your input......

itonewbieAnswer

Level 15

Ministers are treated as employees in relation to income reported on the W-2, by virtue of meeting the common law employee factor tests, although the Code (and, therefore, the IRS) bifurcates on how minister wages are subject to SE-tax.

While it is possible for ministers to have self-employment income acting in capacities other than as being an employee of the church, for which W-2 is issued, they are employees with regard to wages reported on the W-2 and not "self-employed individuals" as defined under §401(c) and, consequently, not qualify for above-the-line SEHI deduction provided for under §162(l).

Medical insurance with respect to the minister's employment income should, instead, be deducted on Sch A.

---------------------------------------------------------------------------------Still an AllStar

T

TaxGuyBill

Level 15

I *THINK* it sounds like the OP is trying to use the SEHI deduction against the 3 'other' Schedule C businesses, rather than the clergy W-2 income.

@RANDYBLANK The Self Employed Health Insurance deduction is limited to the profit of THAT specific business that has the 'plan'. So if you have 3 businesses that EACH have a $1000 profit and you enter $3000 health insurance under one business, the limit will be $1000. In that example, each business would need to have a 'plan' that pays for $1000, and you would enter $1000 under each of the 3 businesses.

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