A self-employed proprietor can deduct annual health insurance premiums under IRC Sec. 162(l) for income tax purposes. By employing his or her spouse and paying medical insurance premiums and possibly other medical costs of the spouse (and family members, including the proprietor) as a tax-free fringe benefit, the proprietor can achieve 100% deductibility for income tax and self-employment tax purposes. However, a key consideration in proving the benefits are provided on account of an employer-employee relationship rather than the family relationship is whether the spouse is a bona fide employee of the business. This issue was the subject of a recent Tax Court summary opinion, where the court held that the proprietor’s husband was an employee of his wife’s daycare business. Payments under the business’s medical benefits plan were excludable from his income, and her business could deduct his medical benefits. Peter Speltz , TC Summ. Op. 2006-25 (Tax Ct.).