Are health insurance premiums deductible for self-employed?

Kyle Walton

8 years ago

“To sum it up…”

Self-employed individuals can deduct the costs of individual health insurance
Self-employed persons can deduct amounts paid as premiums.
Self-employed persons can get Marketplace assistance for premiums, costs, and health savings arrangements
Self-employed individuals can purchase insurance on the Obamacare Marketplace or the state exchange of their place of residence

Among the helpful features of the Affordable Care Act for proprietors and small business owners are full deductions for premiums. Self-employed persons are both owners and employees. As employees, they need coverage, as owners, they need a business deduction to make it affordable.

Comparison shopping is an ideal method for selecting policies for self-employed individuals. One can focus on the aspects most important to one’s situation. Click here to compare health insurance providers in your state now!

The Individual Mandate

The Affordable Care Act requires that nearly everyone get and keep qualified health insurance coverage. Those that refuse or fail to get covered may have to pay the individual shared responsibility tax. There are exceptions and exclusions from the individual mandate including those that do not have file tax returns.

The individual mandate applies to self-employed persons, sole proprietors and other owner-operated businesses with no additional employees.

What is Self-employment?

Self-employed people operate a business for income and they have no additional employees. The definition includes some partnerships, sole proprietors, independent contractors, and freelance employees.

Having one or more employees will make the enterprise a small business, and the owners can get many of the same tax benefits as a small business employer providing insurance.

Tax Deduction for the Self-Employed

The Self-Employed Health Insurance Tax Deduction reduces the adjusted gross income by the amount that the entire household spends on health insurance premiums. The Self-Employed Health Insurance Tax deduction also applies to dental insurance premiums. Comparison shopping is a great way the get the maximum benefit from the Self-Employed Health Insurance Tax Deduction.

Comparison shopping can find the best insurance values at the lowest premium prices available.

Open Enrollment

The open enrollment period is the best time to buy health insurance. Every person subject to the individual mandate can buy insurance during open enrollment. Like others, self-employed applicants can buy insurance during the open enrollment periods set by the federal government.

The open enrollment for the 2017 calendar year runs from November 1, 2016, through January 31, 2017. After open enrollment, self-employed applicants must find a qualifying event for a special enrollment period.

Special Enrollment Periods

The rule is that applicants must signup for insurance during the open enrollment. The Act recognizes that life is not static and important things change after signup. They can be as simple as moving to a different state. Theses changes in status require a new opportunity to buy health insurance. The events qualify for a

The events qualify for a special enrollment period. The federal government and the states recognize the below-listed items as Life Events that qualify for a special enrollment.

Marriage
Divorce
Childbirth
moving to a new location
Loss of insurance as a dependent
Loss of insurance due to loss of employment

Outside of Open Season

Technically, applicants can buy health insurance that meets the ACA requirements outside of the open season. The missing elements are the tax premiums tax credits and the costs assistance programs including Health Savings Accounts. The tax credits and other assistance requires the open season or a special enrollment period.

Medicaid and the CHIP

Persons earning less than 138 percent of the Federal Poverty Level can qualify for Medicaid and CHIP for dependents. These programs have no open season or closed enrollment. One can qualify at any time of the year and get these benefits.

Medicaid and CHIP coverage qualifies under the individual mandate as minimum essential insurance coverage.

The Self-employed Advantage

The self-employed get the advantage of participating in the individual insurance market. The rules that apply limit the amount one must pay for insurance because the law requires that it be affordable.

Affordable insurance for an individual must not exceed eight percent of the adjusted annual income. Self-employed people, like any other individual applicant, may be entitled to an exemption if there are no policies available that meet the costs rule.

Obamacare Assistance for the Self-Employed

Premium tax credits make insurance payments more affordable and manageable. Self-employed people earning between one hundred percent and four hundred percent of the Federal Poverty Level can get Premium Tax Credits applied to the monthly bill.

Those earning between one-hundred percent and two-hundred-fifty percent of the Federal Poverty Level can get subsidies to reduce the effect of out-of-pocket expenses. These benefits come only through the federal marketplace and the state exchanges.

Deducting Other Medical Expenses

Self-employed can deduct premiums. They can also deduct the other medical expenses they incur if they are large enough to qualify. If the total of medical expenses outside of premiums exceed ten percent of the annual income, then they can deduct them on Schedule A. The ACA raised the threshold from seven and one-half percent to ten percent of annual income.

S-Corporations

The IRS does not recognize partners in an S Corporation as self-employed. If there are two or more owners, then the law treats them as employees. The ACA forbids employer reimbursement of premiums unless part of a health plan available to all employees. The below-listed items are significant changes and features of the tax deduction.

Those self-employed persons eligible for coverage through a spouse’s employer cannot deduct health insurance premiums.
Self -employed can use itemized deductions to deduct medical costs such as copays and coinsurance. The total must exceed ten percent of adjusted gross income.
S-Corporations cannot deduct premiums when there are two or more shareholders.

Reporting to the Marketplace

Self-employment poses some problems for documentation. Some business owners may not have up-to-date and accurate records. This information is important to qualifying for Marketplace policies and Marketplace costs assistance. Assistance and tax credits depend upon annual income.

Self-Employed Persons Can Deduct Health Premiums

The Self-Employed Health Insurance Tax Deduction is an advantage for proprietors and other self-employed individuals. They can deduct premiums paid for themselves and their dependents. Deducting premiums will reduce taxation and comply with the law requiring health coverage. They can also deduct medical expenses.

Comparison shopping is the effective way to buy health insurance for the self-employed. While getting the best values, self-employed persons can take full advantage of the tax deductions for premiums and other costs.

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