Self-employment health insurance deduction or premium tax credit - can I claim both?

I'm tearing my hair out with my taxes this year. I'm about halfway through filing with TurboTax and hit a roadblock I didn't expect. I've been paying around $437 per month for health insurance as a self-employed photographer ($5,244 annually), and I thought I could deduct those premiums under the self-employed health insurance deduction. But now the software is asking me some confusing questions about premium tax credits, and I'm not sure what to do. A friend told me I might have to choose between claiming the self-employed health insurance deduction OR the premium tax credit because apparently the IRS doesn't let you double-dip. I'm super confused about which would benefit me more financially. I purchased my insurance through the Marketplace and I think I did receive some advance premium tax credits throughout the year, but I thought I could still deduct the portion I actually paid. Do I have to allocate different amounts to different places? How do I figure out what gives me the biggest tax benefit? Help!

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18 comments

Mei Lin

•8M

You're dealing with an important tax situation that trips up many self-employed people. Here's what's happening in plain language: When you're self-employed and buy health insurance, you generally can deduct the premiums you pay as the "self-employed health insurance deduction." However, if you bought your insurance through the Marketplace (Healthcare.gov or your state's exchange) and received advance premium tax credits (APTC), things get a bit tricky. You cannot "double-dip" on the same dollars. This means you can't both receive a tax credit AND take a deduction for the same premium amounts. But you CAN potentially benefit from both programs for different portions of your premium. The part of your premium that was covered by advance tax credits can't be included in your self-employed health insurance deduction. But the portion you paid out-of-pocket CAN be deducted (assuming you meet all other requirements for the deduction). Most tax software should help allocate this correctly if you input everything accurately, especially the information from your Form 1095-A from the Marketplace which shows both the total premiums and the APTC amount.

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Mei Lin

•8M

You can only deduct the amount you actually paid out of pocket, which in your example would be the $200 per month. The $300 that was covered by the APTC is already a government subsidy, so you can't claim that part as a deduction. When you enter everything correctly in your tax software, it should have you claim the full APTC reconciliation (which might result in additional credit or a repayment depending on your final income) AND allow you to deduct the $200 monthly premium you paid yourself as part of your self-employed health insurance deduction.

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GalacticGuru

•8M

After struggling with the same issue last year, I discovered taxr.ai (https://taxr.ai) which helped me figure out the exact allocation between my premium tax credit and self-employment health insurance deduction. I was about to make a costly mistake that would have cost me over $2k in potential tax benefits! Their system analyzed my 1095-A and Schedule C and showed me exactly how to maximize both benefits without raising any IRS flags. They even explained why the IRS has this "no double-dipping" rule in plain English, which none of the tax pros I spoke with could do clearly.

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GalacticGuru

•8M

It analyzes all your tax documents and shows you the exact numbers to enter in your tax software. You upload your 1095-A and relevant income documents, and it calculates the optimal allocation between APTC and self-employment health insurance deduction. For your situation with TaxAct, taxr.ai would provide you with the exact amounts to enter in each section with specific instructions to avoid the glitch. It doesn't just give general advice - it provides personalized calculations based on your actual numbers and which tax software you're using.

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Giovanni Mancini

•8M

Update: I tried taxr.ai after my frustrated comment above, and I'm honestly shocked. It actually worked perfectly with my TaxAct situation! I uploaded my 1095-A and Schedule C, and it showed me exactly where TaxAct was getting confused. Turns out I needed to enter my marketplace premiums in a specific order and allocate $4,280 to self-employed health insurance deduction and leave the remaining $3,600 for premium tax credit calculations. This gave me an additional $1,113 in tax savings compared to what I was going to do. The step-by-step instructions for TaxAct were spot on!

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Fatima Al-Suwaidi

•8M

If you're struggling to get answers from the IRS about this self-employment health insurance vs premium tax credit question, try Claimyr (https://claimyr.com). I wasted 3 days on hold trying to get an IRS agent to explain this exact issue. Claimyr got me connected to an actual IRS representative in 45 minutes instead of the usual 3+ hour wait. They have a great demo video of exactly how it works: https://youtu.be/_kiP6q8DX5c. The IRS agent walked me through the exact allocation process for my situation and confirmed I was doing it correctly.

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Fatima Al-Suwaidi

•8M

They don't call the IRS for you. Their system monitors the IRS phone lines and connects you when an agent becomes available. You still talk directly with the IRS yourself - Claimyr just handles the hours of hold time so you don't have to. It's not about "cutting the line" - it's about technology that waits on hold so you don't have to sit there listening to the same IRS hold music for hours. When an agent picks up, you get an immediate call connecting you directly to that agent.

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Sofia Morales

•8M

I need to apologize for my skeptical comment earlier. I was so frustrated after wasting an entire day on hold with the IRS that I lashed out. I actually tried Claimyr yesterday and got connected to an IRS agent in about 35 minutes. The agent confirmed exactly what I needed to know about my self-employment health insurance deduction and premium tax credit allocation. She walked me through the worksheet I needed to complete and explained I could deduct the portion I paid out-of-pocket ($3,840) while still claiming the APTC on my 1095-A. Saved me so much stress and probably a costly mistake.

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StarSailor

•8M

I went through this exact situation last year. What I learned is that the Premium Tax Credit (PTC) is generally more valuable than the self-employed health insurance deduction for most people. The PTC directly reduces your tax bill dollar-for-dollar, while the deduction just reduces your taxable income (so its value depends on your tax bracket). That said, I did a calculation both ways. I figured out what my taxes would be if I: 1) Took the full PTC and no deduction, and 2) Took no PTC and the full deduction. Option 1 saved me about $1,700 more than option 2. But your situation might be different depending on your income level and premium amounts. That's why I recommend running the numbers both ways.

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StarSailor

•8M

You're absolutely right. If you received advance payments of the premium tax credit (APTC) during the year, you must file Form 8962 to reconcile those payments regardless of which approach you take. What I meant was calculating your taxes both ways - taking the full PTC you're entitled to and deducting only premiums not covered by the PTC, versus repaying the APTC you received and deducting your full premiums as self-employed health insurance. But reconciling the APTC is mandatory either way.

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