If you’re self-employed, now is the time to purchase your 2017 health insurance plan! Open Enrollment in the the Health Insurance Marketplace and state exchanges is going on now through January 31, 2017. For coverage to begin January 1, 2017, you must purchase a plan before December 15, 2016.
You’re considered self-employed if you have a business that takes in income but does not have employees. People like independent contractors, freelancers and consultants are considered self-employed. If your business has even one employee, you may be able to use the SHOP Marketplace for small businesses to offer coverage to yourself and your employees.
Your Marketplace application will calculate if you qualify for premium tax credits on a health plan, based on your income and household size. Tax credits are based on your estimated net household income for the year you’re getting coverage, not last year’s income. When you’re self-employed, it can sometimes be difficult to estimate your income for the coming year. TurboTax has an Income Estimator tool to help you. During the year, if it looks like your yearly net income will be higher or lower than you estimated, update your Marketplace application as soon as possible so your premium tax credits get adjusted. If your income is lower than you originally estimated you may be able to get more help paying for your health insurance. If it’s more than expected it’s best to make the adjustment so you don’t have to give back some of your premium tax credit at tax time.
Deducting Health Insurance Premiums
Good news: self-employed filers may be eligible to deduct insurance premiums you pay for medical, dental and long-term care insurance coverage for yourself, your spouse and your dependents, whether or not you itemize your deductions.
Penalty for Going without Coverage to Increase — Exemptions Can Help
Based on last year, we expect that nearly 40% of uninsured tax filers will qualify for a penalty exemption on their tax returns for 2016, so it’s definitely worth checking into. Health insurance tax penalties apply to self-employed filers in the same way they do for other individuals. Check out the IRS free online tool to determine if you’re eligible for an exemption. If you don’t qualify for an exemption, the penalty is 2.5% of your total household adjusted gross income, or $695 per adult ($347.50 per child), whichever is higher (with a maximum of $2,085). For 2017 and beyond, the percentage option will remain at 2.5%, but the flat fee will include a cost-of-living adjustment.
Don’t worry about knowing these tax laws. TurboTax has you covered and will ask you simple questions about you and your business and will give you the tax deductions and credits you are eligible for based on your entries.