A sole proprietor has health insurance for herself and has no employees. In figuring the deductible portion of the premiums, which of the following statements is correct?
a. Incorrect. While 100% of premiums may be deductible as an adjustment to gross income, there are limits that can result in less than 100% of premiums being deducted.
b. Incorrect. Net profits shown on Schedule C are only the starting point for figuring the limitations on deducting health insurance premiums as an adjustment to gross income.
c. Incorrect. While reducing net profits by the employer-equivalent portion of the self-employment tax is necessary, this is not the only adjustment to the net profits limitation on deducting health insurance premiums.
d. Correct. The deduction limitation requires that net profits be reduced by both the employer-equivalent portion of the self-employment tax and a deduction for contributions to a qualified retirement plan for the sole proprietor.
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