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previous page Previous Page: Publication 535 - Business Expenses - Nondeductible Premiums
next page Next Page: Publication 535 - Business Expenses - When To Deduct Premiums
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p535-025.htm#en_us_publink1000144800

Capitalized Premiums(p20)


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Capitalized Premiums

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property.
Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale.
taxmap/pubs/p535-025.htm#en_us_publink1000144801

Uniform capitalization rules.(p20)


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You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit.
  1. Produce real property or tangible personal property. For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property.
  2. Acquire property for resale.
However, these rules do not apply to the following property.
  1. Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years.
  2. Property you produce if you meet either of the following conditions.
    1. Your indirect costs of producing the property are $200,000 or less.
    2. You use the cash method of accounting and do not account for inventories.
taxmap/pubs/p535-025.htm#en_us_publink1000144802

More information.(p20)


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For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A.
taxmap/pubs/p535-025.htm#en_us_publink1000144803
Pencil

Worksheet 6-A. Self-Employed Health Insurance Deduction Worksheet

1.Enter total payments made during the year for health insurance coverage established under your business for you, your spouse, and your dependents. Do not include payments for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or:
  • Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer,
  • Any amounts you included on Form 8885, line 4,
  • Any qualified health insurance premiums you paid to "U.S. Treasury-HCTC," or
  • Any health coverage tax credit advance payments shown in box 1 of Form 1099-H.
Also, do not include payments for qualified long-term care insurance.
1.            
2.For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts.   
 a)Total payments made for that person during the year.  
 b)The amount shown below. Use the person's age at the end of the year.  
   $310—if that person is age 40 or younger   
  $580—if age 41 to 50  
  $1,150—if age 51 to 60  
  $3,080—if age 61 to 70  
  $3,850—if age 71 or older  
  Do not include payments for any month you were eligible to participate in a long-term care insurance plan subsidized by your or your spouse's employer. If more than one person is covered, figure separately the amount to enter for each person. Then enter the total of those amounts 2.            
3.Add the total of lines 1 and 23.            
4.Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. If the business is an S corporation, skip to line 11 4.            
5.Enter the total of all net profits* from: Schedule C (Form 1040), line 31; Schedule C-EZ (Form 1040), line 3; Schedule F (Form 1040), line 36; or Schedule K-1 (Form 1065), box 14, code A; plus any other income allocable to the profitable businesses. See the Instructions for Schedule SE (Form 1040). Do not include any net losses shown on these schedules. 5.            
6.Divide line 4 by line 56.            
7.Multiply Form 1040, line 27, by the percentage on line 67.            
8.Subtract line 7 from line 48.            
9.Enter the amount, if any, from Form 1040, line 28, attributable to the same trade or business in which the insurance plan is established 9.            
10.Subtract line 9 from line 810.            
11.Enter your Medicare wages (Form W-2, box 5) from an S corporation in which you are a more-than-2% shareholder and in which the insurance plan is established 11.            
12.Enter the amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or the amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above 12.            
13.Subtract line 12 from line 10 or 11, whichever applies13.            
14.Compare the amounts on lines 3 and 13 above. Enter the smaller of the two amounts here and on Form 1040, line 29. Do not include this amount when figuring a medical expense deduction on Schedule A (Form 1040). 14.            
*  If you used either optional method to figure your net earnings from self-employment from any business, do not enter your net profit from the business. Instead, enter the amount attributable to that business from Schedule SE (Form 1040), line 4b.
* *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. However, it does not include capital gain income.
previous pagePrevious Page: Publication 535 - Business Expenses - Nondeductible Premiums
next pageNext Page: Publication 535 - Business Expenses - When To Deduct Premiums
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication