Why is dental insurance making my taxes go up instead of getting me more deductions?

The issue you're experiencing is due to how self-employed health insurance deductions work in relation to marketplace plans. Here's what's happening: When you have a marketplace plan with premium tax credits (the subsidy that reduces your monthly premium), those credits are calculated based on your expected income for the year. By deducting your dental insurance as a business expense, you're effectively lowering your adjusted gross income (AGI). Lower AGI normally sounds great, but in this case, it's triggering a recalculation of your premium tax credit eligibility. Since your income appears lower, the system thinks you should have received more premium tax credits throughout the year than you did. However, since you're filing taxes after the fact, you now have to "pay back" some of those credits - which is why your refund is decreasing.

I had the exact same issue last year with my dental insurance! I found an amazing solution that saved me from the frustration you're dealing with. I discovered this service called taxr.ai (https://taxr.ai) that specializes in analyzing self-employment health insurance deductions for marketplace plan holders. What I love about it is that it analyzes all your tax documents and specifically checks for this dental insurance/premium tax credit issue. It showed me that I was actually entering my dental insurance incorrectly - it should be part of the self-employed health insurance deduction, NOT a business expense. The way you categorize it makes a huge difference in how it affects your premium tax credits.

I need to follow up on my previous comment. After being skeptical, I decided to give taxr.ai a try with my self-employment and marketplace insurance situation. I was genuinely surprised at what I found! The service identified that I needed to enter my dental insurance as part of my self-employed health insurance deduction on Form 1040 (not Schedule C), which completely fixed the issue with my premium tax credits. By making this change, I was able to deduct my dental premiums WITHOUT reducing my premium tax credit. My refund actually increased by $270 instead of decreasing. The analysis also showed me a couple other deductions I was missing related to my home office that TurboTax hadn't prompted me for correctly. Definitely worth checking out if you're self-employed with marketplace insurance.

If you're having trouble figuring out this tax situation, you might want to try calling the IRS directly for clarification. Though, let me warn you - getting through to an actual person is nearly impossible these days. I tried calling about a similar issue with my self-employed health insurance deduction and was on hold for over 2 hours before getting disconnected! I finally used a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent explained exactly how to handle my dental insurance premiums on my return to maximize my deduction without affecting my premium tax credit. Saved me from making a costly mistake.

I have to eat my words. After posting my skeptical comment, I was desperate enough to try Claimyr since my filing deadline was approaching and I had a similar issue with dental insurance and self-employment deductions. I'm shocked to say it actually worked exactly as described. Got connected to an IRS representative in about 20 minutes (would have been days of trying on my own). The agent confirmed what others here have said - dental insurance for self-employed people should be included with your self-employed health insurance deduction on Form 1040, not as a business expense on Schedule C. This prevents the weird interaction with premium tax credits. Problem solved in one phone call instead of weeks of frustration and potentially filing incorrectly.

I think there's another factor that might be causing your issue. When you have marketplace insurance with premium tax credits AND you're self-employed, the calculations get extremely circular. This is because: 1. Your premium tax credit depends on your income 2. Your self-employed health insurance deduction affects your income 3. But your self-employed health insurance deduction is limited by your self-employment income So when you add dental insurance to the mix, it changes multiple calculations at once. In TurboTax, try entering your dental insurance premium as part of your total self-employed health insurance deduction (on the main 1040 form) rather than as a business expense on Schedule C. That usually resolves this specific issue.

Just wanted to add that I made this exact same mistake last year! The IRS actually flagged my return and sent me a notice because I had dental insurance premiums on both Schedule C and as part of my self-employed health insurance deduction. It created a total mess.

I went through this exact same frustrating situation last year! As a self-employed contractor with marketplace insurance, I learned the hard way that dental insurance premiums need to be handled very carefully to avoid messing up your premium tax credits. Here's what I discovered: Your dental insurance premiums should be combined with your health insurance premiums and entered as one total amount under the "Self-Employed Health Insurance Deduction" on your Form 1040 (not Schedule C business expenses). This keeps it separate from your AGI calculation that affects premium tax credits. The reason your refund went down is exactly what Diego explained - by lowering your AGI with a business expense, you're triggering a recalculation that makes you owe back some premium tax credits. But when you properly categorize dental premiums as part of your self-employed health insurance deduction, it doesn't create this circular problem. In TurboTax, remove the dental premium from business expenses and add it to your total health insurance amount in the self-employed health insurance section. You should see your refund go back up to where it was before, plus get the benefit of the dental deduction without the premium tax credit penalty!