Self-employed health insurance deduction calculation in , Diagnostic Ref 6133

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' 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.

The software 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 Input Return ⮕ Deductions. ⮕ Adjustments to Income.
2. Select the Health Insurance tab. 
3. Scroll to the Form and Activity Name or Number subsection.
4. Select the appropriate form in the Form (Click on arrow to select from list) dropdown field.
5. Enter the Activity name or number if more than one type of business.
6. Enter the appropriate adjustment amount in the Net profit of business under which plan is established [Adjust] field.
7. Go to the Check Return tab and review the Form 7206 to review the changes. 

For tax year 2022 and prior:

The software 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 Input Return ⮕ Deductions. ⮕ Adjustments to Income.
2. Select the Health Insurance tab. 
3. Scroll to the Net Earnings (if multiple businesses) subsection.
4. Select the appropriate form in the Form (Click on arrow to select from list) dropdown field.
5. Enter the Activity name or number if more than one type of business.
6. Enter the appropriate adjustment amount in the Net Earnings (A) field.
7. Go to the Check Return tab and review the Self-Employed Health Insurance Deduction worksheet to review the changes.