Self-employed health insurance deduction with ACA marketplace when spouse has W-2 job?

What if their spouse's employer offers a plan that's affordable for the whole family? Does that change the ability to take the deduction? And does the subsidy amount get reported as income somewhere else on the tax forms?

If the spouse's employer offered a plan that was affordable for the whole family (under 9% of household income), then neither the self-employed person nor dependents would qualify for marketplace subsidies. In that situation, you might still be able to take the self-employed health insurance deduction, but you wouldn't be eligible for Premium Tax Credits through the marketplace. The subsidy (Premium Tax Credit) doesn't get reported as income. It's actually the opposite - it's a tax credit that either reduces your tax liability or increases your refund. The marketplace subsidy is reconciled on Form 8962 when you file your taxes, comparing what you received in advance with what you're actually eligible for based on your final income.

How accurate was it compared to what you might get from a CPA? I'm always skeptical of tax software for complicated situations like this. Did it actually understand the "affordability" test for employer coverage?

Does it handle the situation where income fluctuates during the year? My self-employment income is super unpredictable and I'm worried about having to pay back subsidies if I make more than expected.

The accuracy was really impressive - I actually had my results reviewed by my accountant afterward and she confirmed everything was correct. She was surprised that it properly handled the affordability test for the employer coverage and correctly split out what was deductible. It definitely handles income fluctuations! That was one of my biggest concerns too. It has a planning tool that lets you model different income scenarios and shows how changes might affect your subsidies. It warned me when I was getting close to a threshold that would reduce my subsidies and gave suggestions for managing my income through retirement contributions and business expense timing.

Wait, how does that service work? Aren't you just paying someone to wait on hold for you? Couldn't you just keep calling the IRS yourself?

I don't believe this actually works. The IRS is notoriously impossible to reach. I've tried everything and you're just going to pay for a service that can't deliver. No one can magically get through the IRS phone system.

It's not just paying someone to wait on hold. Their system actually navigates the IRS phone tree and secures a spot in line, then when they're close to an agent, they call you and connect you directly. It saved me literally hours of frustration. I tried calling the IRS myself over 10 times in two weeks and never got through - always got the "call volume too high, try again later" message. With Claimyr I had an IRS agent on the phone the same day. They use some kind of system that keeps trying different numbers and times until they get through. It's basically like having someone dedicated to solving just that one problem instead of you having to keep redialing.

Thanks for pointing that out! I was definitely going to put it on Schedule C so you saved me from making that mistake. Do you know if I need specific documentation from the marketplace showing they determined my wife's coverage was unaffordable? Or is it enough to have the quotes showing the cost would have exceeded 9% of our MAGI?

You don't need official marketplace documentation stating it was unaffordable - you just need to be able to prove it if questioned. Keep copies of your wife's employer insurance offerings showing the family coverage cost, and documentation of your household income. The calculation is straightforward: if family coverage costs more than 9% of household income, it's considered unaffordable per ACA rules. The marketplace itself doesn't actually provide a document stating "this employer coverage was unaffordable" - they just use that determination to decide if you qualify for subsidies. Your 1095-A from the marketplace plus documentation of what your wife's employer offered should be sufficient if you're ever questioned about it.

S-Corp is completely different for health insurance. If you're a >2% shareholder, the corporation can pay your health insurance premiums but they must be included as wages on your W-2, then you deduct them on your personal return. It's technically the same end result tax-wise but the process is different. However, this might actually complicate your marketplace subsidy situation since it changes how your income is structured.

This is really helpful context about the S-Corp transition! I'm wondering - when you mention modeling this out, are there specific income thresholds where the S-Corp benefits clearly outweigh the potential subsidy loss? I'm currently right around 300% FPL and worried that the additional W-2 income from health insurance premiums could push me into a higher subsidy tier or even off the cliff entirely. Did you end up staying with S-Corp or switching back?