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Health Insurance Deduction

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Everything There is to Know About Health Insurance Deductions

There’s nothing worse than getting sick or caught in a medical emergency situation. With access to the right doctors and proper health insurance, you’ll be back in working order in no time. Typically, you have access to health insurance through your employer. But as a freelancer or self-employed person, you are responsible for your own health insurance. The reality is that everyone needs a healthcare plan, regardless of their employment status. Without one, you could face high medical bills, and that’s the last thing you want to worry about when you’re sick! Working as a freelancer or self-employed person comes with many perks and also responsibilities. The good news is there’s self-employed health insurance to tackle any curveballs. With health insurance being one of the largest expenses the average American has, you may be wondering, is self-employed health insurance tax deductible?This post will answer that question and provide you with guidance for self employment health insurance.

Table of contents

Is health insurance tax deductible?...Read more

What are the self-employed health insurance eligibility criteria to look out for?...Read more

Can you receive health insurance from an employer as a 1099 worker?...Read more

What kinds of health insurance can self-employed individuals get?...Read more

Health insurance for self-employed individuals...Read more

Medicaid...Read more

Affordable Care Act...Read more

Freelancer’s Union...Read more

COBRA...Read more

Individual Health Insurance Marketplace...Read more

Premium Tax Credits...Read more

Health insurance tax deductions for self-employed individuals...Read more

Is health insurance tax deductible?

When you’re on a company’s payroll, usually your employer provides you with healthcare. But as a freelancer or self-employed person, it’s your responsibility to enroll in health insurance. The good news is the IRS allows you to deduct health/medical insurance premiums on your taxes. You can deduct health insurance premiums if you itemize the deductions, pay the self-employed health insurance premium directly, or if your medical expenses are more than 7.5% of your yearly income. Premiums are like a monthly membership fee for your healthcare policy. But they don’t include deductibles, co-pays, prescriptions or other expenses you need to pay out of pocket.

Quick tip

If you're self-employed with medical expenses (including insurance premiums) over 7.5% of your AGI, you can generally deduct them. You might even be eligible to deduct them under 7.5% if you meet certain criteria.

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Education Tax Credit

Education Tax Credit

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Itemized Deductions

Itemized Deductions

The most important tax credits self-employed and freelancers.

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Health Insurance Deduction

Health Insurance Deduction

How to itemize health insurance as a tax deductible for freelancers and self-employed people.

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Home Office Deduction

Home Office Deduction

How the home office deduction saves self-employed people and freelancers on their taxes.

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Home Improvement Deduction

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Child Tax Credit

Child Tax Credit

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Travel Expense Deduction

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Food and Entertainment Deduction

Food and Entertainment Deduction

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Charitable Contribution

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How to save on taxes when donating to a charity or non-profit.

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Education Tax Credit

Education Tax Credit

All about the tax benefits available to college students and their parents.

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Itemized Deductions

Itemized Deductions

The most important tax credits self-employed and freelancers.

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Health Insurance Deduction

Health Insurance Deduction

How to itemize health insurance as a tax deductible for freelancers and self-employed people.

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Home Office Deduction

Home Office Deduction

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What are the self-employed health insurance eligibility criteria to look out for?

The main thing to keep in mind when purchasing self-employed health insurance is how to get the best benefits from your plan. You don’t want to pay for a plan that isn't in line with your medical requirements. So try to get as many price quotes from different healthcare providers about different plans to compare coverage and prices. The bill of the medical insurance for self-employed individuals directly impact your tax deduction’s bottom lines.
What are the self-employed health insurance eligibility criteria to look out for?
Full coverage purchased directly from an insurance provider can be downright unaffordable, but Healthcare.gov offers a range of alternatives at the Individual Marketplace if you qualify. Tips for getting insurance through the Healthcare Insurance Marketplace:
  • As a self-employed individual, your business cannot have any employees apart from your spouse or a family member.
  • The annual open enrollment period for the Individual Marketplace is November 1st through January 15th.
  • If you miss the open enrollment period deadline, you can enroll in a policy under Special Enrollment, which allows you to apply for a health plan if you have qualifying life events like loss of healthcare due to unemployment or getting married, within the last 60 days in most cases.
  • You can cancel your Individual Marketplace self-employed health insurance if you take a job that offers health benefits, whether you enroll in the company health plan or not.
  • To qualify for premium tax credits, you will need to show your estimated annual household income for the year of coverage you are planning to purchase insurance to cover. If your income changes during the year, you will need to update this on Marketplace.
Note: If you earn more than the figure you reported on Marketplace by the end of the year, you may need to pay back a portion or all of the premium tax credits you received in advance during purchase. If you end up earning less than the amount you reported on Marketplace, you may receive additional tax credits while filing your taxes for the year.

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Can you receive health insurance from an employer as a 1099 worker?

The assumption almost universally is that 1099 workers, be they freelancers, independent contractors or gig workers, do not receive healthcare coverage from their employers like some employees do when they're on a business' payroll. But in rare circumstances, freelancers can receive health benefits from their hiring company if the benefit compensation is reported as an employer contribution and added to the self-employed person's taxable income. If your hiring company does offer you health benefits as a self-employed individual, it does not need to pay your self-employed health insurance premiums for the benefits it offers you. You can enroll in the standard group plan offered to the company's W-2 employees but pay for your own premiums.

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What kinds of health insurance can self-employed individuals get?

Maybe you purchased an insurance plan directly from an insurance provider or through a state program, or maybe you accessed the official site for American healthcare. The information self-employed individuals need to decide which insurance plan would benefit them most is located on the Individual Marketplace under the official website of healthcare.gov. The plans offered to self-employed workers are flexible based on your annual estimated net earnings. All the plans are designed to cover 10 categories of health insurance outlined by the Affordable Care Act. Dental coverage for adults is optional, but they include essential health benefits like doctor’s consultations, hospital care, medical prescription coverage and pregnancy. If you are more inclined toward plans offered by private insurance providers, make sure to compare their pricing with the benefits they are willing to offer and see what best fits your needs.

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Health insurance for self-employed individuals

Insurance plans that give you benefits in line with your annual income and medical requirements can be found through the federal government, your state of residence or sometimes directly from insurance companies.
Health insurance for self-employed individuals

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Medicaid

Medicaid is a free and public health insurance for those with a low-income status. Each state owns and operates its own variant of the program, with some help from the federal government. There are different eligibility requirements depending on your state. You can access Medicaid at the Healthcare Marketplace if you qualify based on your income.

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Affordable Care Act

The Affordable Care Act (ACA,) also known as Obamacare, offers medical insurance for self-employed people and freelancers. Previously, the ACA required every US citizen to have health insurance coverage for themselves and their families or face a penalty from the IRS. Starting in 2019, this mandate no longer applies except in Massachusetts, New Jersey, Rhode Island, Vermont, California and the District of Columbia. Having a preexisting condition or a major disease won’t stop you from getting self-employed health insurance coverage under ACA. You can apply for health insurance plans online on health insurance exchanges or marketplaces.

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Freelancer’s Union

The Freelancer’s Union is a nonprofit which also offers health insurance plans for self-employed individuals in a number of states, including New York, California, Colorado, Connecticut, Florida, Georgia, New Jersey, Pennsylvania and Texas. The coverage is a bit pricey, but you can select a plan on the basis of your age, income and location.

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COBRA

COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a healthcare option if you lose your job, receive reduced working hours or leave full-time employment, which may lead your employer to stop paying your healthcare premiums. COBRA allows you and your dependents to stay on the same coverage, but you have to cover the self-employed health insurance costs (premiums) on your own, making this an expensive option. The coverage usually lasts up to 18 or 36 months.

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Individual Health Insurance Marketplace

The Health Insurance Marketplace is another option to explore and is a part of the ACA, which provides different coverage options. You can review the options available through the Marketplace and sign up for coverage. However, you need to keep an eye out for the enrollment period. Generally, it takes place from early November to mid-December, with coverage starting in the new year.
Individual Health Insurance Marketplace

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Premium Tax Credits

The premium tax credit is available to low-income freelancers under the Health Insurance Marketplace. You can qualify for the premium tax credit if you make 100-400% of the federal poverty level for your household size. Only health insurance plans bought through the Health Insurance Marketplace and websites linked to the marketplace are eligible for this premium tax credit. Private insurance If your annual earnings are high, you will not qualify for the subsidized insurance offered under ACA. Since you can afford to pay a higher premium, you can easily opt for plans that have a high tax-deductibility. This could work as a triage for you. You would receive medical coverage, and you could deduct your premium payments of your self-employed health insurance to reduce your taxable income and possibly increase your tax returns as well.

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Health insurance tax deductions for self-employed individuals

Can you deduct self-employed health insurance premiums? As a self-employed individual, you’re allowed to deduct the entire annual self-employed health insurance premium that you paid for yourself, your spouse and your dependents from your taxable income, regardless of whether you itemize your deductions or not. Since health premiums are often expensive, taking them as a deduction can considerably reduce your taxable income, saving you money while you make sure you're medically protected. Just remember that you cannot deduct annual premium payments that amount to more than your annual income in a tax year. If your premiums end up costing more than your income, you can claim the health insurance deduction up to your annual income amount. For the remaining excess premium costs, you may be able to claim them as medical expenses in your Schedule A, where you list deductions for your annual tax filing. If your expenses were greater than your income for the year, you won’t be able to claim this deduction. You may not be eligible to deduct your health insurance for self-employed premiums if:
  • Your spouse or live-in partner has a job that extends their healthcare benefits to cover you, but you have refused the coverage
  • You are self-employed but have secured another job that offers a health plan
  • You are eligible to participate in your employer’s health insurance plan but opt not to.
The Internal Revenue Service has outlined the requirements that policy premiums must meet for a self-employed person to claim them as a health insurance tax deduction. If you experience a Qualifying Life Event, you can receive health insurance for self-employment under Special Enrollment, which qualifies as a tax deduction. Finding every tax deduction available to self-employed individuals Keeping track of every expense you have with spreadsheets and saving all your receipts, so you can take advantage of tax write-offs is a significant amount of work. Doing your own taxes takes time and money, especially if you hire a CPA every year. FlyFin's A.I-powered app is built to find all possible deductions in your expenses, including your health insurance premiums. The FlyFin CPA team is on-hand 24/7 for any questions self-employed people have, and they're ready to file your taxes for you at a fraction of the market cost, on time and with 100% accuracy. Save more money and time on your taxes than last year, guaranteed.

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What’s FlyFin?

FlyFin is the most powerful A.I.-powered tax engine for freelancers, gig workers, independent contractors and sole proprietors. FlyFin tracks all your business expenses automatically to find every possible tax deduction. And anyone can file taxes through FlyFin. Our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. Download the FlyFin app for the CPA team to file your taxes for you and get more tax savings than you had last year, guaranteed.
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