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Individual Income Tax Guide

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Page 2: Form 1040, line 25 to line 29

Line 25 – Health Savings Account (HSA) Deduction: You may be able to take this deduction if contributions (other than employer contributions, rollovers, and qualified HSA funding distributions from an IRA) were made to your HSA for the year. You calculate the amount of your HSA deduction in Part I of Form 8889, Health Savings Accounts (HSAs).

Line 26 – Moving Expenses: If you moved in connection with your job or business or started a new job, you may be able to take this deduction. But your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace. If you had no former workplace, your new workplace must be at least 50 miles from your old home. The amount of the expense you must  include is calculated on Form 3903, Moving Expenses, which you must file with your return.

Line 27 – Deductible Part of Self-Employment Tax: Self-employed individuals generally owe self-employment tax on their self-employment earnings. Individuals who owe self-employment taxes can deduct a portion of the tax. You calculate the amount of your self-employment tax and the amount of the tax that you can deduct on Schedule SE, Self-Employment Tax. If you completed Section A (Short Schedule SE) of Schedule SE, the deductible part of your self-employment tax is on line 6 of the schedule. If you completed Section B (Long Schedule SE) of Schedule SE, it is on line 13 of the schedule.

Line 28 – Self-Employed SEP, SIMPLE, and Qualified Plans: If you were self-employed or a partner, you may be able to take a deduction for contributions to a SEP IRA, a SIMPLE IRA, or a qualified plan. See Publication 560, Small Business Retirement Plans, for the instructions and the tables and worksheets to calculate the amount of the contribution deduction to include on Line 28.

Line 29 – Self-Employed Health Insurance Deduction: If you were self-employed, you may be able to deduct the amount paid for health insurance for yourself, your spouse, and your dependents. The insurance can also cover your child who was under age 27 at the end of the year, even if the child was not your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child. A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

You can deduct the amount paid for self-employment insurance if one of the following statements must be true:

NOTE: If you were also eligible to participate in any subsidized health plan maintained by your or your spouse's employer for any month or part of a month during the year, amounts paid for health insurance coverage for that month cannot be used to calculate the deduction. In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of the year, do not use amounts paid for coverage for that month to calculate the deduction.

Example: If you were eligible to participate in a subsidized health plan maintained by your spouse's employer from September 30 through December 31, you cannot use amounts paid for health insurance coverage for September through December to figure your deduction.

Self-employed taxpayers: The insurance plan must be established under your business and your personal services must have been a material income-producing factor in the business. If you are filing Schedule C, C-EZ, or F, the insurance policy can be either in your name or in the name of the business.

Partners: If you are a partner, the policy can be either in your name or in the name of the partnership. You can either pay the premiums yourself or your partnership can pay them and report them as guaranteed payments. If the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premiums as guaranteed payments.

More than 2% S corporation shareholders: If you are a more-than-2% shareholder in an S corporation, the policy can be either in your name or in the name of the S corporation. You can either pay the premiums yourself or the S corporation can pay them and report them as wages. If the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you. You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 in 2016 and you also report the premium payments or reimbursements as wages on Form 1040, line 7.

Line 29 instructions continued on page 3.

Chapter 3 – Adjusted Gross Income