Sole proprietor health insurance (credit, pay, write off, deductions)
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Looks like I will be eligible for an ACA subsidy in 2019. I have always just deducted my premiums as I wasn't eligible for a subsidy (tax credit). My question is how much more valuable is the tax credit versus the tax deduction for health insurance? Is it worth the hassle of getting a marketplace plan to get the tax credit or better just to forego the possible tax credit and use the entire premium as a tax deduction? Probably looking at 90k gross for family of 4.
Every situation is different, we did a subsidy through the ACA website. However, when tax season came about, we actually changed from the subsidy to the tax deduction. At the start of the year we qualified for a decent subsidy, but we lost that subsidy and didnt know it until tax season. They were going to make us repay almost $2500 of subsidies. I do my own taxes through an online service, I was just kind of messing around and realized if we accepted the tax credit it basically evened out what we had to pay. I still think we had to pay a couple hundred dollars.
Being self employed, many are subject to significant income changes and that can be risky if you choose subsidies as I discovered personally. If you do choose subsidies, just remember there could potentially be significant changes by the end of the year. If your income is very stable, then the risk is much lower.
Definitely worth it. With the standards deduction as well as HSA and solo 401k deductions, you can ensure that you stay below the ACA subsidy cliff (which is a MAGI of $100,400 for a family of 4 this year). That cliff can save thousands of dollars, and you can still write off the premiums you do pay. Consider buying tax software in November and running a few possible scenarios for next year.
Where's a good site to look this up? The first year it was required, I called our state insurance group (and I do these types of things in between engagements) and they definitely weren't setup for the gig economy. Long story short, at the end of the year any beneficial pricing I'd received was taken back on my tax return. From then on I flipped back out into my own individually purchased plan.
Last year I spent a good deal of time caretaking. It would have been better to go through the board. Yet every time I call these yahoos they want to systematically extrapolate where I'll be at the end of the year. I don't want to run afoul of the program and create some trigger on my taxes.
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