Arkansas Life and Health Insurance Practice Exam

When Peter, an independent contractor, purchased his own personal medical and dental insurance, he discovered that:

1. Independent contractors cannot deduct any of the costs

2. Self-employed persons may deduct up to 100% of the cost of health insurance for themselves and their dependents

3. The costs are only deductible for dental insurance

4. The costs cannot be deducted if they have dependents

The correct answer is: Independent contractors cannot deduct any of the costs

As an independent contractor, Peter can deduct up to 100% of the cost of his personal medical and dental insurance. This is a benefit available to self-employed individuals and allows them to deduct these costs as a business expense, reducing their taxable income. In this case, option A is incorrect because independent contractors can indeed deduct a portion of the costs associated with their personal medical and dental insurance. Option B is the correct choice as it accurately reflects the tax benefit available to self-employed individuals regarding the deduction of health insurance costs for themselves and their dependents.