 Looking at our income tax formula, we're focused online to the adjustments to income, remembering that the first half of our income tax formula is in essence an income statement. We've got line one being the income minus in essence the equivalent of expenses. Those being the deductions gives us the equivalent of the net income that being the taxable income but everything's flipped on its head. We want the taxable income to be as low as possible as opposed to normally where we want the net income to be as high as possible. We're looking at the adjustments to income which are in essence a type of deduction or you might call it like a contra income type of account meaning it's decreasing the income on the way down to get to the net income or taxable income. You might think of it as a contra income account because it's getting to the subtotal of the adjusted gross income which is an important subtotal because it is used oftentimes for most of the calculations to decrease the benefits from like deductions and credits related to phase outs. Also remember that the above the line deductions, the adjustments to income do not have that same limitation as the itemized deductions do to have to clear a threshold such as the standard deduction to get a benefit from them. So we're looking here on the first page of the tax form and we're focused on line number eight other income from schedule one. If we look at schedule one part number two we are now focused on line 15 the deductible part. I'm sorry we're looking at the line 17 which is the self-employed health insurance deduction. So just a quick recap on this whole concept it's going to be tied to oftentimes your self-employed business often a schedule C. So remember that if we have a schedule C that's going to add a lot of complication to the tax return and we always want to return to the question if we're doing tax preparation do we want to be taking on clients that are going to be more simplified have less bookkeeping needs less complication in which case we're going to have to do more of them and have less profit per return or are we going to do more complex returns and then choose which more complex returns we want to do maybe returns that have a business related to them like a schedule C possibly including like bookkeeping needs and whatnot as we take on those clients because many small businesses often need some help to get everything organized with regards to the reporting of them do we want to specialize in types of industry and possibly types of entity C corporation versus S corporation LLCs and so on or sole proprietorship and so those are kind of things you really want to keep in mind or else you might get a little bit overwhelmed and have too broad of a scope within your business which will make it difficult to scale the business as you kind of imagine it so when we take on a schedule C for example a lot of different things are going to be in place that includes complications to just the calculation of the tax code even if we were just given everything we need such as they give us a income statement we plug that into the schedule C and so on we're also going to have the self-employment tax we'll have to deal with half of the self-employment tax you could see deductible here and then we have planning tools that might be put in place as well as we talked about in a prior presentation like retirement plans like a sep or a simple for example and then with the health insurance that's also an added complication oftentimes because many times it used to be that the health insurance was kind of tied to the employer which makes sense to some degree because sometimes an employer can get like a group plan which that makes it easier for the insurance company possibly to give a lower cost so even if there were no tax incentives and whatnot sometimes an employer might be able to get a beneficial plan just for the fact of having like a group plan set up and it used to be that more people kind of had a single family household thing that's in every household or single earner household and that earner often worked at the same company for a long period of time and so therefore a lot of the benefits being tied to that one place was kind of made sense to some degree as well because it was somewhat stable nowadays people are moving around a lot so you might not have you know one employer for your for your entire life and you're of course could have multiple people that are working within the household instead of one people that's going to be primarily working in the household so this tying of the health insurance to the employer gets a lot more messy in those types of situations and if you're self-employed then the question is can I get a benefit for my for my self-employed type of situation which you may be able to do here online 17 so again obviously health insurance is a messy situation where they're kind of debating on what to do with it as well and the fact that it's tied to an employer gets kind of kind of a tricky situation and so if you're dealing with people that have their own businesses then you have that added complication to deal with how we're going to deal with the health insurance notice it's deducted here and it's not being deducted on the schedule C which you might first expect it to be deducted on right so that's another kind of funny thing all right so let's get into it self-employed health insurance deduction you may be able to deduct the amount you paid for health insurance for yourself your spouse and your dependence that's another kind of question obviously that would come up if I deal with health insurance through my work oftentimes I can get coverage for not only me but my family and so you would like a similar situation if you were self-employed and possibly get some benefit from that the insurance can also cover your child who was age was under age 27 at the end of 2022 even if the child wasn't your dependent so a child includes your son daughter stepchild adopted child or foster child defined and who qualifies as your dependent in the instructions for form 1040 so we'd look we looked at those a bit in the past you could find that of course in the irs website and the instructions for 1040 one of the following statements must be true you were self-employed and had a net profit for the year reported on schedule c or f so self-employed and then net profit note that if you have a schedule c it's possible that you had more expenses than income then you have a loss now the irs is skeptical of losses because if you have a loss you might be able to take that loss against other income the irs wants a piece of your income they don't want to take take on the risk of your losses right if they could avoid it so if you have a loss then you might get a benefit from that loss but you're not going to be able to to possibly take advantage of some of the other kind of components such as putting money into the the health insurance possibly for it because they're going to limit the deduction in that in that case in the event of a loss that might be one reason they put this particular deduction not on the schedule c which would increase the loss amount but rather they they use what you're on you have on the schedule c to help determine whether or not you qualify for the deduction which they put on the schedule one part two since similar kind of situation might happen if you set up like the seps and whatnot if you don't have any income you might not be able to get you're gonna not going to be able to get as much benefit or put as much money into like a sep for example so you were a partner with a net earnings from self-employment you used one of the optional methods to figure your net earnings from self-employment on the schedule se so now we're subject to the self-employment tax a lot of these rules kind of come down to the idea that if you're if you're treating me like a corporation as a sole proprietorship ship making me pay self-employment tax which is kind of the equivalent of payroll taxes then i should i should be able to have the benefits of some of these other stuff that corporations and employees have and so that's some of the justification that might justify for example why you'd be able to deduct like the health insurance and so on because they're trying to mirror what happens in a corporate situation as they treat you in your own business as kind of an employee in charge you these the social security medicare so you received wages in 2022 from an s corporation in which you were more than two percent shareholder health insurance premiums paid or reimbursed by the s corporation are showing as wages on w2 so let me just recap those again you were self-employed and had a net profit for the year reported on schedule c or f you were a partner with net earnings from self-employment you used one of the optional methods to figure your net earnings from self-employment on schedule se you received wages in 2022 from an s corporation in which you were more than two percent shareholder health insurance premiums paid or reimbursed by the s corporation are showing as wages on form w2