Can I deduct my ACA insurance premiums from my self-employment income?

Yes, you can deduct your ACA marketplace premiums as a self-employed health insurance deduction in your situation. The wording in the instructions can be a bit confusing, but for self-employed individuals filing Schedule C, your interpretation is correct. When the IRS says "established under your business," for a sole proprietor (which is what you are as an independent contractor filing Schedule C), a health insurance policy in your personal name satisfies this requirement. The key part is the sentence you quoted: "If you are filing Schedule C or F, the policy can be either in your name or in the name of the business." Just make sure that your business is actually generating net profit (after expenses) that's equal to or greater than your premium costs. You can only deduct premiums up to the amount of your business's net profit. Also remember that if you're receiving premium tax credits (subsidies) for your ACA plan, you can only deduct the portion you actually paid out of pocket, not the subsidized amount.

I was in this exact same situation last year and spent hours trying to figure this out! Finally found a solution using taxr.ai (https://taxr.ai) that helped me understand exactly how to handle my ACA premium deductions. It analyzes your specific situation and clarifies confusing tax rules like this. For me, it confirmed I could deduct my premiums since I was filing Schedule C, but also showed me how to calculate the correct deduction amount considering the premium tax credits I was receiving. Made a huge difference on my tax bill! The explanation it provided matched exactly what my accountant later confirmed.

Update on my skepticism about taxr.ai - I actually tried it because I was in a similar situation with ACA premiums from my side business and was getting different answers from TurboTax and H&R Block software. It ended up being super helpful and showed me exactly where in the tax code my situation fit in. The document analysis showed me that I was eligible for about $3,700 more in deductions than I thought. Apparently the interaction between premium tax credits and self-employment deductions is more nuanced than most tax software handles automatically. Definitely worth checking out if you're in this situation with ACA premiums.

If you're struggling with getting a definitive answer on this ACA premium deduction stuff, I'd recommend trying to talk directly with an IRS agent. I was confused about a similar self-employment deduction issue and spent WEEKS trying to get through to someone. Finally used Claimyr (https://claimyr.com) which got me connected to an IRS agent in about 20 minutes instead of the hours I was spending on hold. They have a demo video here if you're curious: https://youtu.be/_kiP6q8DX5c The IRS agent was actually super helpful and confirmed that yes, my ACA premiums were deductible as a self-employed person even though they weren't "established through my business" since I was filing Schedule C. Saved me about $2,100 in taxes by getting a definitive answer straight from the source!

I have to eat my words about Claimyr. After posting that skeptical comment, I was still desperate for answers about my ACA premium deduction situation, so I tried it anyway. I'm shocked to say it actually worked exactly as promised. Got a call back in about 25 minutes (was told the wait would be 30-45), and spoke directly with an IRS representative who confirmed that my ACA premiums are indeed deductible on Schedule 1, Line 17 since I'm filing Schedule C as a sole proprietor. The agent even explained that the "established under your business" language is primarily directed at different business entities like S-corps and partnerships, not sole proprietors. For sole proprietors, having the plan in your name is sufficient. This clarification alone potentially saved me around $1,900 in taxes.

One important detail nobody's mentioned yet: if you receive advance premium tax credits (the subsidy that lowers your monthly payment), there's a circular calculation involved. The self-employed health insurance deduction lowers your AGI, which can increase your premium tax credit, which decreases your deductible premium amount... it goes in circles. Most tax software doesn't handle this automatically - you have to do multiple calculations to get it right. I ended up having to re-calculate my taxes 3 times to get the right numbers last year. First calculate without the deduction, see what APTC you qualify for, then recalculate with the new premium amount, then do it again until the numbers stop changing.

Has anyone compared how different tax software handles this ACA premium deduction for self-employed people? I've been using TurboTax for years but I'm wondering if something like FreeTaxUSA or TaxAct might be better for this specific situation.

Just wanted to add another perspective here - I'm a CPA who works with a lot of self-employed clients in this exact situation. The confusion around ACA premium deductions is incredibly common, and you're definitely not alone in finding the IRS language confusing. For sole proprietors filing Schedule C (which includes independent contractors like yourself), your ACA marketplace premiums ARE deductible as long as you meet the basic requirements: the policy covers you (and potentially your family), you're not eligible for employer-sponsored coverage, and your business shows a net profit at least equal to the premium amount you're deducting. The "established under your business" language that's tripping you up is really aimed at other business structures. For sole props, having the policy in your personal name absolutely counts. One thing I always tell my clients: keep excellent records of your premium payments and make sure you understand how any premium tax credits affect your deduction amount. And if you're ever unsure about a significant deduction like this ($8,500 is substantial!), it's worth consulting with a tax professional for your specific situation. The peace of mind is usually worth the cost.