Squeeze through health insurance loophole

How can you best obtain affordable health care coverage in 2013 if you’re self-employed? Depending on your situation, you might be able to go through the “back door.” Strategy: Hire your spouse to work for your business. Then cover your spouse under your health insurance plan as an employee. As a result, you’re allowed to provide insurance to dependents of your spouse—including yourself! For years, deductions claimed by selfemployeds for health insurance expenses were limited, but now you’re entitled to deduct 100% of the cost. So you can deduct the health insurance costs you provide for yourself. However, the deduction for a self-employed individual is claimed on your personal tax return, rather than as a business expense. This is generally less advantageous for selfemployeds. Reason: Your net income is higher for self-employment tax purposes. For 2013, you’re required to pay 15.3% on the first $113,700 of self-employment income and 2.9% on amounts above that. And you can’t deduct the health insurance premiums from your selfemployment income. Thus, even with the 100% deduction, the back-door method is still preferable. This reduces your business income on all levels. Tip: Significant health care law changes take effect in 2014.