Here is an interesting quirk I discovered today and I would like to see if anybody can provide information to the contrary. A local CPA prepared the return for my client who is 69 and self-employed. The client had roughly $3,800 in self-employment income. Prior to going to the CPA, I told the client to make sure that he took his Medicare Premiums as an above the line deduction. I was surprised when I got the return back and there was a $290 self-employment tax deduction, a $3,500 self-employed health insurance deduction, and a $3,500 IRA deduction.

I looked through all the resources that I could find, Proview, IRS instructions, etc. And I am pretty sure the return was prepared with ProSeries. Evening reading through the form instructions the only thing that I could find was that self-employed health insurance deductions are deductible to the extent that gross income exceeds the deduction for 1/2 of self-employment tax and any contribution to qualified retirement plans. Of course, IRAs are non-qualified plans and would seem to be exempt from this calculation. I can’t find anything that says that you can’t do this. If anybody can provide hard evidence, instructions or Revenue Rulings, I would greatly appreciate it!