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Publication 535
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taxmap/pubs/p535-025.htm#en_us_publink1000208857

Capitalized Premiums(p19)

rule
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_publink1000208858

Uniform capitalization rules.(p21)

rule
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_publink1000208859

More information.(p21)

rule
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_publink1000209237
Pencil

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

Note. Use a separate worksheet for each trade or business under which an insurance plan is established.

1.Enter the total amount paid in 2010 for health insurance coverage established under your business for 2010 for you, your spouse, and your dependents. Effective March 30, 2010, your insurance can also cover your child who was under age 27 at the end of 2010, even if the child was not your dependent. But do not include the following.
  • Amounts for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or, effective March 30, 2010, the employer of either your dependent or your child who was under the age of 27 at the end of 2010.
  • 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."
  • Any health coverage tax credit advance payments shown in box 1 of Form 1099-H.
  • Any payments for qualified long-term care insurance (see line 2)
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 tax year.  
   $330—if that person is age 40 or younger   
  $620—if age 41 to 50  
  $1,230—if age 51 to 60  
  $3,290—if age 61 to 70  
  $4,110—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 or, effective March 30, 2010, the employer of either your dependent or your child who was under the age of 27 at the end of 2010. 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 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. Do not include Conservation Reserve Program payments exempt from self-employment tax. 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. Do not include Conservation Reserve Program payments exempt from self-employment tax. 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.
7a.Complete Schedule SE (Form 1040) as a worksheet. When completing Section A, line 3, or Section B, line 3, of the worksheet Schedule SE, treat the amount from Form 1040, line 29, as zero. Enter on this line the amount shown on that worksheet Schedule SE, Section A, line 6, or Section B, line 13 7a.
7b.Multiply line 7a by the percentage on line 67b.
8.Subtract line 7b 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 any amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or any amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above. When completing Form 2555, line 44, use the deduction figured on line 7a above (in place of the amount from Form 1040, line 27) that is allocable to the excluded income 12.
13.Subtract line 12 from line 10 or 11, whichever applies13.
14.Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Do not include this amount when figuring any 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), Section B, 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.
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