Effective yesterday, new legislation will allow self-employed individuals to deduct their health insurance costs as a business expense for payroll tax purposes. This payroll deduction only applies to 2010 tax returns.
This one-year tax deduction is expected to save self-employed business owners approximately $456 to $968 in taxes this year.
According to the National Association for the Self-Employed (NASE), self-employed business owners that meet all of the following requirements can take advantage of this new tax deduction:
Files an IRS Form 1040 Schedule C tax form or Schedule E with earned income - this includes sole proprietors, single member LLCs, and sole owner S-Corporations
Pays self-employment taxes via IRS Form 1040 Schedule SE
Pays for individual or family health coverage in 2010