(Phil:) One thing I haven't seen yet is anything remotely resembling a reason for IRS's change in position. Have you seen anything? There was a reference to the health care legislation in that IRS e-mail, but it had to do with children under age 27, which didn't make a lot of sense in the context of the specific question.

You're right. My take on it is that IRS finally got it right.

Seriously, their position always was a little weak on this. And our more authoritative reference sources just quote the IRS 1040 instructions, which have changed since last year, and that is kind of weird.

They had previously come to the realization that for a lot of self-employed folks with no employees, the only way to buy health insurance is with an individual policy, which would be in their own name. That happened in 2005, when they issued a Chief Counsel Advisory Memo, allowing an individual policy as being "established in the name of the business", where the sole proprietor and the business were one and the same.

There was a pre-existing (the word comes to mind with health insurance) rule, from 1995, about Medicare premiums as not qualifying since it was a govt. program, and therefore couldn't be "established in the name of the business". OK, that seemed logical.

But that meant, therefore, that a self-employed business owner, over 65 years of age, whose most likely option was to get Medicare plus a supplement policy, could deduct the supplement policy premiums but not the Medicare premiums. And they have now moved to eliminate that inconsistency.

Maybe we shouldn't ask questions too loudly. They might think about it again.

Bill