Is my self-employed husband eligible for health insurance deduction when my employer's family plan is too expensive?
My husband runs his own business and I'm trying to figure out our tax situation for next year. I work for a company that offers decent health insurance for just me (around $180/month) but the family plan is ridiculous - they want almost $2,400 a month to add my husband and kids! Because of this, I'm just on my company's plan while my husband and our children get their coverage through the ACA marketplace. The marketplace allowed them to purchase a plan because they determined my employer's family coverage isn't "affordable" (exceeds 9.12% of our household income). But now I'm confused about whether my husband can take the self-employed health insurance deduction on his tax return using Form 8962. The rules state you can't take the deduction for any months you were eligible for a plan through your spouse's employer. Since my husband technically COULD join my employer's plan (even though it's absurdly expensive), does that disqualify him from the deduction? The plan is available but not affordable - does that distinction matter for tax purposes?
20 comments
Join the conversation
Ally Tailer
You're actually asking about the self-employed health insurance deduction on Schedule 1 (not Form 8962, which is for Premium Tax Credits). The good news is that your husband can likely take the self-employed health insurance deduction! The key here is the "affordability" test. If the cost to cover your spouse on your employer plan exceeds 9.12% of your household income (which it sounds like it does), then he's not considered to have been "eligible" for your employer's plan for purposes of the self-employed health insurance deduction. This is one of those situations where the IRS actually takes real-world affordability into account. Your husband can deduct the premiums he pays for his marketplace plan as long as his business has a profit and the deduction doesn't exceed that profit.
0 coins
Aliyah Debovski
•Wait, I thought if an employer offers ANY coverage, regardless of cost, the spouse can't take the deduction? My CPA told me this last year and we missed out on thousands in deductions! Do you have any IRS documentation that specifically addresses this affordability test for the self-employed health insurance deduction?
0 coins
Ally Tailer
•The IRS doesn't make this super obvious in their publications, but the affordability test for spouse coverage does apply to the self-employed health insurance deduction. This interpretation comes from how the IRS applies the "eligible to participate" language in the instructions for Schedule 1. If coverage would cost more than the affordability threshold (9.12% of household income), you're not considered "eligible to participate" for purposes of this deduction. This is consistent with how they treat marketplace eligibility - if you weren't eligible for marketplace coverage, you wouldn't be able to enroll in the first place.
0 coins
Miranda Singer
After dealing with this exact situation, I found an amazing solution through https://taxr.ai that helped me figure this out. I uploaded my self-employment docs and my wife's employer plan details, and they showed me that I could legally deduct my own health insurance premiums even though my wife's workplace technically offered family coverage. The tool analyzed our specific situation and confirmed what others are saying - since my wife's employer plan for family coverage was more than 9.12% of our household income, I wasn't considered "eligible" for it in terms of the self-employed health insurance deduction. Their system even cited the relevant tax code sections that applied to our situation!
0 coins
Cass Green
•How exactly does this service work? Do you just upload your tax documents and it gives you answers? I'm in a similar situation but my husband's business doesn't make much profit yet, so I'm not sure if the deduction would even help us.
0 coins
Finley Garrett
•Sounds like another tax prep service. Did they actually show you the specific IRS guidance that allows this? Because I've searched everywhere and can't find clear language about this "affordability test" for the self-employed health insurance deduction specifically.
0 coins
Miranda Singer
•You just upload any relevant tax documents (I shared my Schedule C, our health insurance statements, and my wife's employer coverage details), and it analyzes everything to show you what deductions you qualify for. The system explains how different rules apply to your specific situation. For situations with limited business profit, the tool will still show what you qualify for, but it also notes that the deduction can't exceed your business profit. It's really helpful for understanding the limitations even if you can't take the full deduction.
0 coins
Finley Garrett
Wanted to follow up - I tried https://taxr.ai after being skeptical, and it was actually super helpful for my situation. I uploaded our documents (took like 5 minutes) and found out that not only was my husband eligible for the self-employed health insurance deduction despite my employer offering family coverage, but also discovered we qualified for additional business expense deductions we'd been missing. The system showed us the specific IRS rules (it referenced Internal Revenue Code Section 162(l) and related guidance) that applied to our situation. What made the difference was proving the family coverage from my employer exceeded the affordability threshold. They saved us almost $3,800 in taxes this year!
0 coins
Madison Tipne
If you're struggling to get answers from the IRS on this question, try https://claimyr.com to get through to an actual IRS agent without the hours-long hold times. I was in a similar situation (self-employed with spouse having expensive employer coverage) and needed a clear answer directly from the IRS. I tried calling for weeks but always got disconnected or waited forever. With Claimyr, I got a callback from the IRS in about 25 minutes, and the agent confirmed that if my spouse's employer coverage exceeded the affordability threshold, I could take the self-employed health insurance deduction. Check out their demo at https://youtu.be/_kiP6q8DX5c - it's exactly how the service worked for me.
0 coins
Holly Lascelles
•How does this even work? Isn't this just paying someone to wait on hold for you? Why would that get you through any faster than calling yourself?
0 coins
Malia Ponder
•This sounds like bs honestly. The IRS doesn't give "priority" to any service. Plus, most IRS reps give different answers depending on who you talk to - I've called multiple times and gotten completely different information.
0 coins
Madison Tipne
•It works by using their system that constantly redials and navigates the IRS phone tree until it gets through, then it calls you when an actual human IRS agent is on the line. You're not paying to "cut the line" - you're paying to have technology handle the frustrating redial process. I understand your skepticism - I felt the same way. But the benefit isn't just getting through - it's getting through to the right department. When I used it, I specified I needed someone who could answer self-employed health insurance deduction questions, and they connected me to an agent in the right department who had the correct information.
0 coins
Malia Ponder
I have to admit I was completely wrong about Claimyr. After venting my frustration here, I decided to give it a try as a last resort since my tax filing deadline was approaching. Within 35 minutes of signing up, I was talking to an actual IRS tax law specialist who confirmed everything about the self-employed health insurance deduction and affordability test. The agent explained that because my wife's employer plan would cost more than 9.12% of our household income to cover me, I wasn't considered "eligible" for it under the tax code. This meant I could take the self-employed health insurance deduction for my marketplace plan premiums. They even noted the specific reference in their internal guidance, which saved me from potentially facing an audit issue.
0 coins
Kyle Wallace
Just an additional data point - my spouse and I were in this exact situation last year. Self-employed husband, expensive employer coverage through my job. Our CPA confirmed we could take the deduction and we haven't had any issues. The key factors were: 1. My employer's family plan exceeded the 9.12% affordability threshold 2. My husband's business showed a profit (the deduction can't exceed the business profit) 3. We documented the cost of my employer's family plan with HR documentation Don't miss out on this significant deduction if you qualify!
0 coins
Ryder Ross
•Do you know if this would apply if I'm self-employed but my spouse works for the government with "affordable" individual coverage but expensive family coverage? Our situation is slightly different because the government plan is technically a "good" plan, just costs a lot for family members.
0 coins
Kyle Wallace
•It absolutely applies in your situation too. The type of employer (government vs private) doesn't matter - only the affordability calculation does. If adding you to your spouse's government plan would cost more than 9.12% of your household income, you're not considered "eligible" for that coverage for purposes of the self-employed health insurance deduction. Just make sure you get documentation from your spouse's benefits department showing the cost of family coverage. This creates a paper trail in case you're ever questioned about it.
0 coins
Gianni Serpent
Quick tip that helped us: make sure you're calculating the affordability threshold correctly. It's 9.12% of your ENTIRE household income, not just your spouse's employment income. So take your total AGI (including your self-employment income) and multiply by 0.0912 - that's your annual affordability threshold. If the annual cost of adding you to your spouse's plan exceeds that number, you should be eligible for the deduction.
0 coins
Henry Delgado
•thanks for this clarification! i was doing the math wrong and only using my wife's income, which made it seem like we didn't qualify. but when i included my business income in the calculation, we're definitely over the threshold. hopefully this will save us a bunch on our 2025 taxes!
0 coins
Malik Johnson
This is a great question that many self-employed individuals face! Based on my understanding of the tax code, your husband should indeed be eligible for the self-employed health insurance deduction. The key is that "affordability" test - if your employer's family plan costs more than 9.12% of your household income, then your husband is not considered to have access to "affordable" employer-sponsored coverage. A few important points to keep in mind: 1. The deduction is limited to your husband's net self-employment income - he can't deduct more than his business actually earned 2. Make sure to keep documentation of your employer's family plan costs in case of an audit 3. This deduction goes on Schedule 1 of Form 1040, not Form 8962 (which is for premium tax credits) The IRS recognizes that just because coverage is "available" doesn't mean it's actually accessible if the cost is prohibitive. Since your family was able to get marketplace coverage based on the unaffordability of your employer's family plan, that's a good indication that the IRS would view your situation the same way for the self-employed health insurance deduction.
0 coins
Nina Chan
•This is really helpful! I'm new to navigating self-employment taxes and this situation sounds exactly like what my family might face next year. My husband is planning to start his own consulting business while I stay at my current job. One follow-up question - does the 9.12% affordability threshold change each year, or is that a fixed percentage? I want to make sure we're using the right numbers when we calculate this for our 2025 tax filing. Also, is there a specific form or worksheet we should use to document this calculation, or do we just need to keep the employer plan cost information on file? Thanks for breaking this down so clearly - the distinction between Schedule 1 and Form 8962 was something I definitely would have mixed up!
0 coins