I retired some time ago, but still not on SS. I'm looking for ways to reduce my taxes by being able to deduct such items as health insurance premiums, etc. -- basically the Sched. C stuff. I've told that I would have to qualify as "self employed" under the tax code. I earn virtually all my money via passive income -- dividends, interest, IRA. Can I qualify? If so, how?Thanks, Bill
I don't see how money from dividends, interest, and IRA could be considered earned income from self-employment.You say "virtually" all your money comes from such -- what about the portion that doesn't?Schedule C is for people who are actually self-employed -- the guy who does yardwork, the web designer, the jewelry maker, etc. -- and who have expenses associated with this self employment -- office supplies, cost of goods sold, etc. They need to keep good records all along the way, and keep the business expenses and income separate from personal expenses and income. You can't just say at the end of the year "hey! I was self-employed and I'm gonna deduct a bunch of stuff!"The IRS has info for small businesses at http://www.irs.gov/businesses/small/index.html
I'm looking for ways to reduce my taxes by being able to deduct such items as health insurance premiums, etc. -- basically the Sched. C stuff. I've told that I would have to qualify as "self employed" under the tax code.Bill,Two points here.1. Your unearned income (interest, dividends, etc) does not put you in the self employed category. Forget Schedule C.2. You don't need to be self employed to be able to deduct health insurance premiums. You can deduct them along with any other out of pocket (unreimbursed) doctor, dentist, eyewear bills (to give a few examples) as medical expenses on Schedule A. The caveat is that you can only deduct the expenses that exceed 7.5% of your adjusted gross income.
To qualify as self-employed, you must be paid as an indepndent contractor, and it must not be a money losing hobby. Common self-employment activities for elders include consulting for former employer, yard work, baby sitting, and preparing the odd tax return. Essentially, a small amount of money earned may be totallly written off income, up to 70%(2002) or 100%(2003) of health insurance premiums, including Medicare Part B.
Can the income PLUS the insurance premiums be written off? In other words, if my income was $1k and related expenses were $1k and premiums $4k, could I write off a net of $4k?Thanks to all you commented.Bill
Bill,You are not self-employed if your income comes soley from interest, dividends, and the like. You'll be able to write off medical premiums to the extent that they exceed 7.5% of your adjusted gross income. And then only if your total deductions on Schedule A exceed your standard deduction. Assuming you're required to file a tax return based on the amount of your unearned income, you'll have to jump two hurdles...1) Your medical premiums and other "out of pocket" medical expenses must exceed 7.5% of your adjusted gross income.2) Assuming the expenses in note 1) above exceed the 7.5%, you will not get any benefit unless your other deductions from Schedule A plus your medical deductions exceeding the 7.5% of AGI, exceed your standard deduction.
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