Q: I'm self-employed and pay for my own health insurance. Have the deductions improved any from the 50% that has been allowed?

A: Yes. Since 2003, self-employed individuals have been able to deduct the whole amount of health insurance.

Q: Where do I deduct the health insurance?

A: You deduct it "above the line," before you calculate your adjusted gross income.

Q: Now that I'm self-employed, I have been paying my estimated income taxes each quarter, and I seem to be paying a lot of money. Why is that?

A: When you are employed by somebody else, you have a certain amount of money deducted from your paycheck for Social Security tax and Medicare. (This might be referred to as "FICA" in your state.) That deduction represents one-half of the total employment tax. Your employer pays the other half. When you are self-employed, the tax laws will consider you half employer and half employee. You have to pay both parts of that whole tax, but you can get half of it back when you file your 1040.

Q: What are the different schedules for?

A: Cast yourself once again as both an employer and an employee. As an employer, you have tax responsibilities as a creator of income. As an employee, you have the tax responsibilities of a person who works for a living. Thus, as your employer, the income you create is a profit (or a loss), and you are entitled, just like any other for-profit business, to take deductions authorized for businesses. Schedule C or Schedule C-EZ is used to report your profit (or loss) and your business expenses to determine that. The result of that determination is part of your income as a person who works for a living. That's the part that gets reported on the front side of your 1040, which is the form for individual income tax.

Schedule SE is where you figure out how much you have to pay in employment taxes (for the trust fund, as opposed to income taxes for Congress).