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Understanding Lacerte diagnostic ref 6133 - Self-employed health insurance deduction calculation

by Lacerte Tax 2023 Updated 3 months ago

This article will help to understand the following informational diagnostic, Ref. #6133:

  • The taxpayer's self-employed health insurance deduction was computed using the taxpayer's net self-employment income from all sources.  The data indicates that the taxpayer may have self-employment income from more than one source.  Net earnings from self-employment for purposes of computing the SE health insurance deduction may need to be adjusted to reflect the earnings of the business under which the insurance plan is established.  An entry in 'Form' and 'Activity name or number' (screen 24, codes 403 and 404) can be used to adjust base income. (ref. #6133)

What's new for the Self-employed health insurance deduction for tax year 2023:

Starting in tax year 2023 the IRS has released Form 7206 to calculate the Self-employed health insurance deduction for the 1040. In tax years 2022 and prior, the IRS used the Self-employed health insurance deduction worksheet from the 1040 instruction booklet to calculate the allowable deduction on the 1040.

Lacerte shows the calculation for the Self-Employed Health Insurance Deduction on Form 7206. It uses self-employed income from all sources, as indicated on line 4 of the 7206 to calculate the deduction. 

It might be necessary to adjust the net earnings from self-employment for purposes of computing the deduction, to reflect the earnings of the applicable business under which the insurance plan is established.

To enter adjustments to net earnings

  1. Go to Screen 24, Adjustments to Income.
  2. Select SE Health Insurance (7206) from the left sections menu.
  3. Under Form and Activity Name or Number select the appropriate form in the Form (Ctrl+T) dropdown field.
  4. Enter the Activity name or number if more than one type of business (for example., Schedule C 1, Schedule C 2).
  5. Enter the appropriate adjustment amount in the Net profit of business under which plan is established [A] field (code 406).  
  6. Go to the Forms tab and review the 7206 to review the changes.     

For tax year 2022 and prior:

Lacerte shows the calculation for the Self-Employed Health Insurance Deduction in the worksheets generated with the forms. It uses self-employed income from all sources, as indicated on line 4 of the Self-Employed Health Insurance Deduction (Form 1040, Line 29) worksheet to calculate the deduction. 

It might be necessary to adjust the net earnings from self-employment for purposes of computing the deduction, to reflect the earnings of the applicable business under which the insurance plan is established.  

To enter adjustments to net earnings

  1. Go to Screen 24, Adjustments to Income.
  2. Select SE Health Insurance from the left sections menu.
  3. Scroll to the Net Earnings (if multiple businesses) subsection.
  4. Select the appropriate form in the Form (Ctrl+T) dropdown field.
  5. Enter the Activity name or number if more than one type of business (for example., Schedule C 1, Schedule C 2).
  6. Enter the appropriate adjustment amount in the Net Earnings (A) field (code 406).  
  7. Go to the Forms tab and review the Self-Employed Health Insurance Deduction worksheet to review the changes.     
Lacerte Tax

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