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How to Take Advantage of Self-Employed Health Insurance Deduction
Self-starters who don’t have access to a group health insurance plan often end up purchasing a self-employed health insurance plan on the individual health insurance market. Another option may be buying group health insurance for self-employed people, which you can do in some states even if you work for yourself and don’t have any employees. No matter what, learning how to take advantage of the self-employed health insurance deduction is a valuable savings benefit for those who will need to cover the cost of health insurance on their own.
Going from having employer coverage to purchasing your own individual policy can come with a certain amount of confusion about the process and variation in costs. Purchasing your own plan with self-employed health insurance can sometimes end up being more expensive than paying the premiums on an employer’s group plan options. This difference is because group health coverage allows an employer to make a substantial contribution to paying employees’ premiums. Thanks to the Affordable Care Act, Americans are getting some help. That help comes in the form of premium tax credits, among other tax benefits. These tax benefits, or subsidies, are great news for the self-employed, who have traditionally had to foot the entire bill.
But the biggest benefit for those who are working for themselves is the self-employed health insurance deduction. For most people who are self-employed, this tax benefit allows 100 percent of health insurance premiums for you and your dependents to be deducted on your tax return. When filing your tax return, you can decrease your adjusted gross income by the amount your household spent on health insurance premiums—dental and long-term care premiums included. And these deductions do not prevent you from taking advantage of the above mentioned premium tax credits.
Like any other ACA-approved plan, self-employed health insurance plans can only be purchased during an open enrollment period. And it’s important to note that premiums from these purchased plans can only be deducted from your tax return for months during which you were not eligible for a subsidized group plan through either your own or a spouse’s employer. If you have suffered a tax loss (when total expenses exceed total revenues) for the year you are filing, you will not be able to deduct your health insurance costs, as this deduction is limited to your self-employment income. In other words, those who are self-employed may only claim a deduction amount equal to or less than their income from self-employment. But you can still claim them as expenses in an itemized medical deduction on Schedule A.
Despite all the information that is available, figuring out whether you qualify for a self-employed health insurance deduction can still be a somewhat confusing issue. But with the rising cost of healthcare, it is certainly worth the extra trouble to figure out. Luckily, not everything has to be as challenging as figuring out your taxes. Here at HealthMarkets, we can help you through some of the other worries that accompany being self-employed and needing health insurance. We can search thousands of plans from hundreds of carriers to guide you in finding the plan that best fits your budget. We can help answer your questions about subsidies, too. We have over 3,000 licensed agents nationwide who can help you. Call us today at (855) 839-8126.
HealthMarkets agents cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual circumstances.
Sources: https://www.accountingtools.com/articles/2017/5/15/tax-loss | http://obamacarefacts.com/self-employed-health-insurance/ | https://www.thebalance.com/self-employment-health-insurance-deduction-3193015 | http://time.com/money/4251595/best-healthcare-for-freelancers/ | https://turbotax.intuit.com/tax-tips/home-ownership/deducting-health-insurance-premiums-if-youre-self-employed/L6bRhLaVE | https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/Deducting-Health-Insurance-Premiums-If-You-re-Self-Employed/INF12128.html