Hi,

I retired in February 2022. My spouse is self employed (schedule C) as a real estate agent. We used COBRA to continue my health insurance, paying 100% of the premiums.

1. Can my spouse take the deduction for self-employed health insurance on our 2022 tax return? Or do we have to take it on schedule A?

2. For 2023 we will be buying insurance on the exchange. Is there anything specific we have to do (such as who is primary or whether the business buys it) to be able to take the self-employed deduction vs schedule A?

3. We will likely qualify for ATPC in some amount which means we can't use a "business" insurance plan if we want to get the credit. Can an individually purchased plan get the self-employed HI deduction?

It's a bit confusing trying to navigate the system and figure out the tax ramifications.

Thanks.

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1.
Assuming your wife's business meets certain criteria, your wife and you
take the deduction for health insurance premiums the two of you pay
(for health insurance covering both of you) on Form 1040, Schedule 1,
Line 17 (which ultimately adds to to Form 1040, line 10). Note: The
line numbers I am giving could change slightly.

2.
-- By my reading, for a Schedule C business with no employees, the only
way to deduct health insurance premiums is using the aforementioned
Form 1040 lines. In other words, the business does not buy the health insurance.

-- For marketplace insurance, and to take the deduction, who is primary
or listed first does not matter. Both spouses' premiums are deducted
from income using the aforementioned Form 1040 lines.

3.
I am not sure I understand the question. Whatever the two of you pay
for health insurance (while your wife is self-employed and the business
meets certain criteria) is deducted on Form 1040 as described above, with
some important IRS/IRC caveats as explained below.

4.
Here in December 2022, as one arranges for marketplace insurance for 2023,
one estimates one income for the coming year. The healthcare.gov software
then computes your Advance Premium Tax Credit (APTC) based on this estimate
of 2023 income. If your income is low enough, then each month you will pay
only a portion of the health insurance premium. The government will pay the rest.
In early 2024, when you prepare your taxes for 2023, the amount you //should// have
paid for the premiums is re-computed using your //actual// 2023 income. If this sounds like
some kind of never-ending computer program loop, you are correct. To review: What
you should end up paying for your 2023 health insurance depends on your MAGI; however,
your MAGI depends in part on how much you deducted for payments for health insurance.
The instructions for your tax forms explain how to resolve this. (I could not fit
all the instructions into this tiny space.) The instructions for the tax forms describe
the iteration that is involved.

5.
If there's anything you do not understand when you apply for marketplace insurance
over the internet, do not hesitate to call the representative designated for your state.
The vocabulary the marketplace insurance system uses is arcane. The steps one takes to sign up for health insurance are not intuitive. 

6.
In case you were wondering about deducting the cost of health insurance
as a business expense (to reduce self-employment tax), I did not speak to
this because it sounds like it does not apply. The only way it might apply
is if you became an employee of your wife's business. If you want to
look into becoming an employee of your wife's business to  take advantage
of this, then ask.

A little reinforcement of the above:

https://www.irs.gov/taxtopics/tc502 (scroll down to the sentence starting with, "If you're self-employed and have a net profit for the year... ")

https://www.keepertax.com/posts/self-employed-health-insurance-deduction

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

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On Saturday, December 3, 2022 at 10:44:44 AM UTC-5, honda....@gmail.com wrote:

1.
Assuming your wife's business meets certain criteria, your wife and you
take the deduction for health insurance premiums the two of you pay
(for health insurance covering both of you) on Form 1040, Schedule 1,
Line 17 (which ultimately adds to to Form 1040, line 10). Note: The
line numbers I am giving could change slightly.

2.
-- By my reading, for a Schedule C business with no employees, the only
way to deduct health insurance premiums is using the aforementioned
Form 1040 lines. In other words, the business does not buy the health insurance.

-- For marketplace insurance, and to take the deduction, who is primary
or listed first does not matter. Both spouses' premiums are deducted
from income using the aforementioned Form 1040 lines.

3.
I am not sure I understand the question. Whatever the two of you pay
for health insurance (while your wife is self-employed and the business
meets certain criteria) is deducted on Form 1040 as described above, with some important IRS/IRC caveats as explained below.

4.
Here in December 2022, as one arranges for marketplace insurance for 2023, one estimates one income for the coming year. The healthcare.gov software then computes your Advance Premium Tax Credit (APTC) based on this estimate of 2023 income. If your income is low enough, then each month you will pay only a portion of the health insurance premium. The government will pay the rest.
In early 2024, when you prepare your taxes for 2023, the amount you //should// have
paid for the premiums is re-computed using your //actual// 2023 income. If this sounds like
some kind of never-ending computer program loop, you are correct. To review: What
you should end up paying for your 2023 health insurance depends on your MAGI; however,
your MAGI depends in part on how much you deducted for payments for health insurance.
The instructions for your tax forms explain how to resolve this. (I could not fit
all the instructions into this tiny space.) The instructions for the tax forms describe
the iteration that is involved.

5.
If there's anything you do not understand when you apply for marketplace insurance
over the internet, do not hesitate to call the representative designated for your state.
The vocabulary the marketplace insurance system uses is arcane. The steps one takes to sign up for health insurance are not intuitive.

6.
In case you were wondering about deducting the cost of health insurance
as a business expense (to reduce self-employment tax), I did not speak to this because it sounds like it does not apply. The only way it might apply
is if you became an employee of your wife's business. If you want to
look into becoming an employee of your wife's business to take advantage
of this, then ask.

A little reinforcement of the above:

https://www.irs.gov/taxtopics/tc502 (scroll down to the sentence starting with,
"If you're self-employed and have a net profit for the year... ")

https://www.keepertax.com/posts/self-employed-health-insurance-deduction

Thanks, this helps a lot.

I agree, my third question was poorly worded but you answered what I was trying to ask.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

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