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Phone: 503-823-5157

Arts Tax: 503-865-4278

111 SW Columbia St, Suite 600, Portland, OR 97201

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BTAR 600.93-4A Self Employment Tax Deduction and Health Care Premium Deduction

City of Portland Revenue Bureau, License and Tax Division

Business Tax Administrative Rule 600.93-4A

Self-Employment Tax Deduction and Health Care Premium Deduction

Generally, a self-employed individual (sole proprietor) subject to self-employment taxes is allowed a deduction equal to the Federal deduction for the employer-equivalent portion of self-employment taxes, as calculated on Schedule SE and reported on line 27* of Form 1040.  The deduction is taken as an adjustment to net income for business license tax and business income tax purposes. No deduction is allowed for self-employment taxes included in line 27* that relate to self-employment income from a pass-through interest in a Partnership or S-Corporation.

Additionally, self-employed individuals who are allowed a federal adjustment for a portion of their health insurance expenses may take a deduction which equals the federal deduction as an adjustment to net income for business license tax and business income tax purposes.

Example: Sally Lawrence, a sole proprietor, files a Schedule C and a Schedule SE. Ms. Lawrence also pays $4,000 in health insurance premiums. The net income on Schedule C is $50,000. The deduction for the employer-equivalent portion of self-employment tax is $3,532.  This amount is reported on line 27* of Form 1040 to compute AGI and is an allowable subtraction on line 4 of the City/County Form SP. Additionally, $1,000 of the health insurance premiums are deducted on page 1, line 29*, of the Form 1040. Ms. Lawrence is allowed a deduction of $4,532 ($3,532 plus $1,000) from net income.

A Partnership or an S-Corporation is not allowed either the deduction for the employer-equivalent portion of self-employment taxes or the deduction for self-employed payment of health insurance premiums. The expenses allowed as adjustments on the individual partner’s or shareholder’s Form 1040 are not expenses of the Partnership or of the S-Corporation.

*Line number reference is based on the 2011 Form 1040.


Adopted: 11/23/93

Amended: 8/29/94 (health insurance premium deduction added), 12/26/00 (housekeeping changes), 10/11/12 (housekeeping changes)

(PCC 7.02.600 B / MCC 12.600 B)

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