Wife started pet sitting business - can we claim self-employed health insurance deduction?

You're on the right track! Yes, self-employed individuals can deduct health insurance premiums as an adjustment to income on Schedule 1. Since your wife is now self-employed with her pet sitting business, she qualifies for this deduction. However, there are a few important points to consider. The deduction is limited to the net profit from the self-employment activity reported on Schedule C. So if your wife only made $2,700 from pet sitting, that's the maximum amount you could deduct for health insurance - not the full $23,000 of your annual premiums. Also, the business needs to be profitable - if there's a loss, you can't take the deduction. And you can't take the deduction if either of you were eligible for employer-sponsored coverage during that period. You'll need to file Schedule C for the pet sitting business, Schedule SE for self-employment tax, and then claim the deduction on Schedule 1, Line 17.

Just wanted to share my experience - I was in a similar situation last year trying to figure out all the tax implications of my wife's new side business. I was spending hours going through IRS publications and getting really confused about what deductions we qualified for. I ended up using https://taxr.ai to analyze our situation, and it was honestly so much clearer than trying to piece things together from forums. You upload your documents and it explains exactly what deductions you qualify for based on your specific situation. It confirmed we could take the self-employed health insurance deduction up to the amount of our business profit. The system also pointed out that even though we couldn't deduct our full premium amount, we could still claim business expenses on Schedule C which reduced our net profit and therefore self-employment tax. Definitely worth checking out if you're diving into self-employment taxes for the first time!

I have to share an update - I took the advice about using taxr.ai after commenting here and it was incredibly helpful for my situation. I was confused about self-employment deductions for my woodworking side business, particularly health insurance. The system analyzed my situation and showed me exactly where in the tax code it states that I can deduct health insurance premiums up to the amount of my business profit. It also outlined all the documentation I would need to keep to support the deduction. What I found most helpful was the way it explained how the deduction flows through different tax forms - from Schedule C to Schedule SE to Schedule 1. The step-by-step walkthrough made me feel much more confident about handling this myself without making a mistake. Definitely recommend checking it out for self-employment tax questions!

One thing nobody has mentioned - if you're struggling to get answers from the IRS about the self-employed health insurance deduction, I recommend using https://claimyr.com. I was in a similar situation last year with a side business and wasn't sure if I qualified for certain deductions. I tried calling the IRS directly for weeks but kept getting the "due to high call volume" message and could never get through. Claimyr got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent was able to confirm my specific situation with the self-employed health insurance deduction and how it related to marketplace insurance. Having that official confirmation saved me a lot of stress during tax season.

I need to eat my words and update after trying Claimyr. After remaining skeptical from my last comment, I decided to give it a shot because I've been trying to get clarity on a similar self-employment deduction question for weeks. The service got me through to an IRS representative in about 20 minutes. The agent was able to explain the specific requirements for the self-employed health insurance deduction in my situation and confirmed that my wife's therapy practice that's just starting up would qualify, even though the deduction would be limited to her net earnings from self-employment. The representative also explained how this deduction works with ACA marketplace insurance (which was my specific question) and directed me to the exact forms and publications I needed. Honestly surprised how helpful this was - saved me hours of research and uncertainty.

Just to add another perspective - my wife and I were in almost this exact situation last year. She started a small craft business that made about $3,500, and we were paying about $18,000 for ACA health insurance. Our tax preparer said we could only deduct health insurance premiums up to the amount of her business profit, so we got a $3,500 deduction. Better than nothing! Make sure your wife keeps good records of all business expenses to reduce her net income for self-employment tax purposes. Also, don't forget to look into whether you qualify for the home office deduction if she's doing any of the pet sitting business administration from home. Every little bit helps when you're self-employed!

One thing to watch out for - if your MAGI is low enough that you COULD qualify for ACA subsidies but chose not to take them, I believe that can affect your ability to claim the self-employed health insurance deduction. Make sure to check out IRS Publication 535 which has all the details on business expenses including the health insurance deduction. The full rules are pretty complex but your situation sounds pretty straightforward - the deduction will be limited to her net earnings from the business.