Margaret is single and is a self-employed proprietor of a convenience store near the mall. During the current year, Margaret paid $4,000 for health insurance coverage for herself. She paid another $500 for coverage for her unrelated employee, Corky. How should Margaret deduct the health insurance cost?
I.Margaret takes $500 as a business expense.
II.Margaret takes the $4,000 as a deduction for AGI.

Question

Margaret is single and is a self-employed proprietor of a convenience store near the mall. During the current year, Margaret paid $4,000 for health insurance coverage for herself. She paid another $500 for coverage for her unrelated employee, Corky. How should Margaret deduct the health insurance cost?
I.Margaret takes $500 as a business expense.
II.Margaret takes the $4,000 as a deduction for AGI.​

Quizplus · Accepted Answer

Both statements are correct. Margaret can deduct the $500 paid for her employee's health insurance as a business expense, and she can deduct the $4,000 paid for her own health insurance as a deduction for adjusted gross income (AGI).

Margaret Is Single and Is a Self-Employed Proprietor of a Convenience