I have been a 1099 consultant/contractor for the past 5 years. As a contractor I always buy my own health insurance and I deduct these premiums as part of my annual business expenses each year at tax time.
In 2012 I am taking a position with a new company as a W2 employee. This company has paid vacation and retirement but does not have group health insurance. Instead they offer a $128.00 a month reimbursement that can be put toward your own health care plan that you choose and buy as an individual.
So, I still need to buy my own health insurance even though I am W2. From what I have read online it appears that if I take this W2 position that I cannot deduct my health insurance premiums anymore as I was able to do as an 1099 contractor.
It appears that the federal government will only allow a w2 employee to deduct anything over 7.5% of Adjusted Gross Income. So for instance, If a person makes $100,000.00 and they pay $8000.00 a year in medical premiums then they can deduct $500.00 only.
Am I understanding this correctly? If so, doesn't it almost seem that the 1099 route is a better way to go here because I can deduct my medical premiums appropriately each year versus having to pay for it out of pocket and not be able to deduct this as a business expense.