How much of my health insurance premium can I deduct as self-employed? Marketplace tax credits are confusing me
Hey there tax folks, I need some guidance because I'm totally confused about my self-employment health insurance deduction. So I started my freelance photography business in January and signed up for health insurance through the Marketplace. When enrolling, the agent asked about my expected income and I just guessed $35,000 since I had no clue what my new business would bring in. Based on that estimate, I got a pretty sweet tax credit that dropped my monthly premium from around $650 down to about $190. Well, turns out my business did way better than expected (yay!) and I ended up making closer to $85,000 this year. Now I've got to pay back those premium tax credits since I earned over the threshold, which basically means I'm on the hook for the full insurance cost. I just entered my 1095-A form into TurboTax and it added back all those tax credits, increasing my taxable income. But now I'm totally confused about the self-employed health insurance deduction. TurboTax has this line saying self-employed people can deduct 100% of health insurance premiums. Does this mean I can only deduct the $190/month I actually paid out of pocket? Or can I deduct the full $650 monthly premium now that I'm repaying the tax credits? Or can I not deduct anything at all? I'm so lost with all these tax forms and would really appreciate any help!
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Santiago Diaz
What you're experiencing is actually pretty common for new business owners. The good news is that as a self-employed person, you can deduct the FULL premium amount ($650/month in your case), not just what you paid out of pocket during the year. Here's why: When you're paying back the premium tax credits on your tax return, you're essentially paying for the full cost of the insurance. So the IRS allows you to deduct the entire premium amount as a self-employed health insurance deduction. The way it works in TurboTax is that first, your 1095-A form will increase your tax liability by adding back those advance premium tax credits you received. Then, in the self-employed section, you can claim the full premium amount as a deduction. Just make sure your business has enough profit to cover the deduction. The self-employed health insurance deduction can't exceed your business profit.
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Millie Long
•Wait, I'm in a similar situation but my accountant told me I could only deduct what I actually paid during the year. Are you sure about being able to deduct the full premium? Also, does it matter if the insurance only covers me vs. covering my whole family?
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Santiago Diaz
•You can definitely deduct the full premium amount, not just what you paid out of pocket. This is because you're ultimately responsible for the entire premium cost - either through monthly payments or by repaying the tax credits at tax time. The deduction can cover insurance for yourself, your spouse, and your dependents. Family coverage is fully deductible as long as you're self-employed with sufficient business profit. The key requirement is that the policy must be established under your business name or your own name as a self-employed individual.
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KaiEsmeralda
I went through this exact situation last year with my consulting business! I highly recommend checking out https://taxr.ai - they have a special tool specifically for self-employed people dealing with Marketplace insurance and premium tax credits. I was just as confused as you are now, and their system helped me understand exactly what I could deduct. They analyzed my 1095-A, Schedule C, and all my business documentation, then gave me clear guidance on maximizing my legitimate deductions while staying compliant. Their system showed me that I was missing several parts of the self-employed health insurance deduction that my tax software didn't clearly explain. It was super helpful to have something double-check all my work.
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Debra Bai
•How exactly does taxr.ai work with the health insurance deduction? Does it just give general advice or does it actually check your specific numbers and forms? I'm interested but skeptical about using yet another tax tool.
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Gabriel Freeman
•I've never heard of taxr.ai before. How is it different from just using TurboTax or talking to a regular accountant? Is it just for self-employed people or does it work for other tax situations too?
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KaiEsmeralda
•It works by having you upload your tax documents (like your 1095-A and Schedule C), and then their AI analyzes your specific situation and provides personalized guidance. For the health insurance deduction, it checks your premium amounts against your business income to ensure you're claiming the maximum eligible deduction. Taxr.ai works alongside tax software like TurboTax rather than replacing it. The difference from a regular accountant is that it's available 24/7 and costs significantly less. While it was designed with self-employed people in mind, it handles many tax situations including investments, rental properties, and various credits. I found it especially helpful for complex scenarios that tax software doesn't explain well.
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Gabriel Freeman
Just wanted to follow up about my experience with taxr.ai! I decided to try it after posting here and wow, I'm glad I did. I uploaded my 1095-A and Schedule C, and it caught something I totally missed - I was only deducting what I paid out of pocket ($190/month) instead of the full premium amount ($650/month). The system showed me exactly where to enter this in TurboTax and explained why I qualify for the full deduction. It also flagged that I wasn't properly allocating some of my business expenses, which was reducing my net profit unnecessarily. For anyone dealing with self-employed health insurance deductions, especially with marketplace plans and tax credits, their guidance was super clear and easy to follow. Definitely helped me understand things better than just reading IRS publications!
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Laura Lopez
If you're still struggling with this issue, I recommend using Claimyr (https://claimyr.com) to actually speak with an IRS agent directly about your situation. I was in a similar spot last year with Marketplace credits and self-employment deductions and spent WEEKS trying to get through to the IRS. Claimyr got me connected to an IRS agent in under 20 minutes when I had been trying for days. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with clarified that I could indeed deduct the FULL premium amount (not just what I paid out of pocket) because I was repaying the advance premium tax credits on my return. They also explained how to properly document everything to avoid audit flags since this is an area they look at closely.
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Victoria Brown
•How does this Claimyr thing actually work? I've tried calling the IRS before and it's always just a busy signal or they hang up after 2 hours on hold. Do they have some secret backdoor number or something?
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Samuel Robinson
•This sounds too good to be true. Why would the IRS answer a call through some third-party service when they won't answer their own phones? And even if you do talk to someone, the IRS phone reps often give conflicting information. I'd rather just go by what's in the actual tax code.
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Laura Lopez
•There's no secret backdoor. Claimyr uses an automated system that continuously calls the IRS for you using their public numbers and navigates the phone tree until it connects. When it gets through, it calls your phone and connects you directly to the agent. It's basically handling the frustrating waiting and redialing part so you don't have to. The value of speaking with an IRS agent isn't just getting any answer - it's getting an answer that's recorded in their system. When the agent makes notes on your account, it provides some protection if there are questions later. You're right that not every phone rep is equally knowledgeable, but I found that asking specifically for someone familiar with self-employed health insurance deductions got me to the right person. The written tax code is important, but sometimes you need clarification on how it applies to your specific situation.
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Samuel Robinson
I need to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it because I was desperate for answers about my self-employed health insurance deduction situation. I was connected to an IRS tax specialist in about 15 minutes (after trying for WEEKS on my own). The agent walked me through exactly how to handle the health insurance deduction with repaid premium tax credits, and even noted it in my file in case of any future questions. The agent confirmed that I can deduct the FULL premium amount on line 16 of my Schedule 1, not just what I paid out-of-pocket. She also explained that I need to make sure my net business income on Schedule C is greater than my total annual health insurance premiums to claim the full deduction. Honestly, the peace of mind from having an official answer directly from the IRS was worth it. No more conflicting advice from random internet sources.
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Camila Castillo
One thing to watch out for with the self-employed health insurance deduction that nobody's mentioned yet - if you're eligible for health insurance through your spouse's employer (even if you don't take it), you CANNOT take the self-employed health insurance deduction. Cost me thousands last year because I didn't know this rule.
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Riya Sharma
•That's good to know! My spouse works part-time at a coffee shop but doesn't qualify for benefits, so I think I'm still eligible. But would this rule still apply if my spouse was offered insurance but it was super expensive? Like if their employer offered coverage but wanted $800/month for a family plan?
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Camila Castillo
•You're in a good position since your spouse doesn't qualify for benefits at their part-time job. That means you're still eligible for the self-employed health insurance deduction. If your spouse was offered insurance but it was very expensive, you'd still be disqualified from taking the deduction. The IRS doesn't consider the cost when applying this rule - simply the fact that coverage was available through a spouse's employer disqualifies you. It's a frustrating rule that affects many self-employed people with working spouses, regardless of how unaffordable that employer coverage might be.
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Brianna Muhammad
Don't forget that the self-employed health insurance deduction goes on Schedule 1, not Schedule C! I messed this up my first year and it caused all kinds of issues.
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JaylinCharles
•I got this wrong too! I kept trying to put it as a business expense on Schedule C and couldn't figure out why my numbers weren't matching up with what TurboTax was calculating. Also, remember that this deduction reduces your AGI but not your self-employment tax.
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