Question

Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums (not through an exchange). Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?
a. Hector chose not to participate in the employer-sponsored plan of his spouse.
b.Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan.
c.Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan.
d. Hector can deduct the health insurance premiums regardless of the insurance status of his spouse.
e. None of these - health insurance premiums can only be deducted as an itemized deduction.

Answer 1

Answer:

b.Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan.

Explanation:

According to the Affordable Care Act (ACA), the legal requirement for health insurance for firms with at least 50 employees is employer-sponsored coverage for employees and their children (until the age of 26). Although, most employers do provide coverage to spouse as well however, that is not a legal requirement. Hence, it can be suggested that Hector is not covered under employer-sponsored plan of the spouse. But, if Hector uses the Schedule A and itemize the medical deductions then Hector can deduct the cost of the premiums for AGI. This option also involves Hector's personal income as self-employed person as well. Hector's income must equal or exceed the total amount of health insurance deduction other wise only those deductions will be sanctioned that are equal to Hector's income.