Question 67

Sole proprietors are allowed to deduct 100% of their gross income they pay for health insurance.

Sole proprietors can deduct 100% of their health insurance premiums from their gross income, which significantly reduces their taxable income and overall tax liability.

A) 25%

This option is incorrect because sole proprietors can deduct a much higher percentage of their health insurance premiums than 25%. The tax code allows for a full deduction, not a partial one.

B) 50%

This option is also incorrect. While 50% may be a deduction applicable to some other business entities or situations, sole proprietors are specifically allowed to deduct 100% of their health insurance costs.

C) 75%

This option is incorrect as well. The deduction for sole proprietors is not limited to 75% of health insurance premiums; rather, it encompasses the entire amount paid, which is 100%.

D) 100%

This is the correct answer. Sole proprietors can fully deduct the cost of health insurance premiums, which is designed to provide financial relief and encourage individuals to secure health coverage.

Conclusion

The correct deduction percentage for sole proprietors is 100%, allowing them to fully deduct their health insurance costs from their gross income. Options A, B, and C incorrectly suggest lower percentages, which do not align with the tax benefits provided to sole proprietors under current tax law. Thus, D is definitively the accurate choice.