Governor Matt Blunt today signed HB 444, a bill that exempts social security benefits from state income taxes. But the bill, sponsored by House Speaker Rod Jetton (pictured at right), also provides a deduction for health insurance premiums paid by some self-employed business owners and other taxpayers that are not able to deduct such premiums under current law. Associated Industries of Missouri and the Taxpayers Research Institute of Missouri supported these changes during the 2007 legislative session.
Self-employed business owners, partners and partners in S Corporations may already deduct 100% of their health insurance premiums from their federal taxes and that deduction "flows through" to the state tax return. But these business owners may not take the 100% deduction if they are eligible for coverage under a spouse's insurance plan. Some business owners may find they may obtain insurance coverage at less cost without using their spouse's plan, although they may trade higher deductibles and less coverage for the savings. These self-employed business owners would have to pay federal and state taxes on their premiums under the current law, unless they qualified for deduction as a medical expense.
Taxpayers may only deduct as a medical expense the amount of health insurance premiums and all other medical expenses that exceed 7.5% of their adjusted gross income.
HB 444 eliminates the tax on health insurance premiums for ALL taxpayers, including these self-employed business owners that are eligible for coverage under a spouse's plan and other taxpayers whose medical expenses are not greater than 7.5% of their adjusted gross income.
For more information on the deductibility of health insurance premiums and other medical expenses, see IRS Publication 502. For more information on HB 444, click here.
