Rep. Ron Kind (D-Wis.,), Wally Herger (R-Calif.), Suzanne Kosmas (D-Fla.) and Dave Reichert (R-Wash.) have introduced H.R. 1470, Equity for Our Nation’s Self-Employed Act of 2009, into Congress. The bill would end inequity within the tax code that penalizes self-employed business owners and makes it difficult to afford quality health coverage.

The bill allows sole proprietors to deduct the cost of health insurance premiums as a normal business expense when calculating their federal self-employment taxes. Under current law, all business entities except sole proprietors can deduct their health premiums as a business expense and forgo FICA (Social Security and Medicare) taxes on these expenses. This leaves filers of Schedule C and Schedule E tax forms as the only business expense paying a 15.3 percent tax on these costs. The self-employed are the only segment of the business population that pays this extra tax on health insurance.

According to a 2007 Kaiser Family Foundation study, a self-employed individual pays an average of $12,106 annually in health insurance premiums for family coverage. Based on this average, sole-proprietors pay $1,852.22 more to the federal government in payroll tax on these premiums.
Source: National Small Business Association, www.nsba.biz/