If you, your spouse or an adult child is self-employed, no doubt you already know just how expensive insurance is in the individual market. Moreover, you know how difficult is to find comprehensive coverage when you’re buying your own insurance. For example, most policies don’t cover pre-natal care, or child-birth– a huge problem for young women.
But under the Affordable Care Act everything changes. Beginning in January, you will be able to purchase a policy in your state’s Exchange—a one-stop marketplace where you can shop for plans. They will be easy to compare because all policies sold in the Exchanges must cover “10 essential benefits” including pre-natal care, maternity, dental and vision care for children, rehab and mental health care. There will be no no co-pays for preventive care and the deductible does not apply.No matter how much care you or your family need, there will be a cap on your out-of-pocket expenses of roughly $6,000 for a single individual or $12,000 for a family. (These rules apply to anyone buying their own insurance in the Individual Exchange, whether they are self-employed, unemployed, or work for an employer who doesn’t offer affordable, comprehensive health benefits.)
Lower Premiums, Subsidies
In the Exchange, you will automatically become part of a large group, and as a result, premiums will be lower than the premiums you would papy today for similar coverage.
Moreover, depending on your income, you may be eligible for a subsidy. For example, a 30-year-old couple with joint income of $45,000 would receive a subsidy of roughly $2700 and wind up paying $4,000 a year for comprehensive coverage that includes free preventive care. (This is a national average)
What You May Not Know about Health Insurance and Tax Deductions
You probably are aware that if you are self-employed and buy your own medical, dental or long-term care insurance, you can deduct premiums for an individual or a family plan on your income tax.
But did you know that if:
You Have Children under 27, you also can deduct premiums you pay for them–even if they are no longer your dependents?
You or Your Spouse Receive Medicare, the IRS has now ruled that you can deduct Medicare premiums for Parts A, B, C and D? This is in addition to the deduction for insurance that you or your spouse buy in an Exchange.
How Much Can You Deduct?
To calculate your allowable health insurance deduction, take your self-employment income, and subtract the 50% deduction for self-employment taxes. Then subtract any retirement contributions made to SEP-IRA, SIMPLE-IRA, or Keogh plan. The remainder is how much you can deduct for health insurance expenses.