Do I qualify for the Self-Employed Health Insurance Deduction if I only did a small amount of freelance work?

Forum|Forum|5 years ago
March 21, 2021
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I earn most of my income from a staff job but it is not full-time and my employer can't give me health insurance, so I buy it from the marketplace. I also did one freelance gig in 2020. Do I qualify for the deduction even though self-employment is not my main source of income? I don't really refer to myself as "self-employed." The IRS instructions for this say "The insurance plan must be established under your business" and I'm not sure what that means... if the insurance policy is under my name, and I do business under my name, does that work? Thank you!

TurboTax Deluxe Online

Best answer by dmertz

Market place coverage is handled differently. How do you know if you can use deduct premiums OR NOT ?

The amount of your self-employed health insurance deduction is not permitted to exceed the premiums paid minus any net Premium Tax Credits you received. When you proceed through the section where you enter your Form 1095-A, you'll mark the box to indicate that you were self-employed and bought a Marketplace plan. TurboTax will then do an iterative calculation to produce a combination of self-employed health insurance deduction and PTC that is permissible.

DavidD66

You can deduct the premium for your health insurance for the period for which you were self-employed. So if you your one freelance gig lasted one month, you can deduct one month's premium.

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dmertz

Employee

As far as I know, there is no restriction that the deduction for self-employed health insurance is limited only to premiums paid for "the period for which you were self employed." If you are self employed, for this purpose you are considered self-employed the entire year and can treat as a self-employed health insurance deduction the entire amount (limited to net profit from self-employment reduced by the deductible portion of self-employment taxes and any self-employed retirement contribution such that the sum of the amounts on Schedule 1 lines 14, 15 and 16 does not exceed net profit), provided the policy is in your name or the name of your self-employment business and you are not eligible to participate in your or your spouse's employer-provided plan.

Section 162(l) says:

(l) Special rules for health insurance costs of self-employed individuals

(1) Allowance of deduction

In the case of a taxpayer who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to the amount paid during the taxable year for insurance which constitutes medical care for—

(A) the taxpayer,
(B) the taxpayer’s spouse,
(C) the taxpayer’s dependents, and
(D) any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27.

Note the phrase, "the amount paid during the taxable year."