The IRS just announced a formal change in the long-held position on the deductibility of Medicare premiums (normally withheld from Social Security Benefits). Until about 2009, the IRS position was that a self-employed taxpayer (including partners and more than 2% S corporation shareholders) could not deduct Medicare premiums above the "line" as part of the self-employed health insurance deduction.
Starting in 2010, the instructions for form 1040 and other related forms had added a sentance or two indicating you could deduct these premiums above the line, but there was no formal announcement. This has changed with the release of CCA 201228037. Now, you can include these Medicare premiums paid with your other normal health insurance premiums and deduct it above the line.
However, for S corporation shareholders and partnerships, a notice issued previously by the IRS requires that these premiums actually be reimbursed by the corporation (or paid directly by the employer which is not normally applicable with Medicare premiums). This requires a check be issued by the employer to the employee paying the Medicare premiums. These payments would then be included in the income of the employee (deducted by the employer) and then deducted on page 1 of form 1040. If these guidelines are not followed completely, then the deduction is not allowed.
If you have not deducted these premiums on any return before this year, you can go back and claim the deduction by filing an amended tax return. Most likely 2009-2011 returns are still available to be amended.
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