Health insurance and other medical costs are some of the most significant business expenses for freelancers in the US. Suppose you are one of the many million Americans without health coverage or an uninsured freelancer whose family premiums are paid out-of-pocket. What will you do? Will you continue to pay these heavy premiums from your own hard-earned money, or will you look into some Federal tax deduction schemes? If you have no familiarity with the deduction of your health premiums in your own country, Read this guide till the end.
You may qualify for a tax deduction for these costly premiums. Self-employed persons like freelancers and gig workers can deduct the cost of their medical insurance premiums as a self-employed health insurance deduction. Health insurance costs will vary based on factors such as your age, location, and any pre-existing conditions.
What is a health insurance deduction for freelancers?
The self-employed health insurance deduction is a subtraction from income that allows freelancers and spouses to deduct 100% of the cost of health insurance they paid, so the amount is not taxed. This is available to those who pass a two-part test that makes sure they meet IRS standards for what qualifies as “self-employed.” Spouses of such people can also claim this deduction if their spouse’s health insurance policy covers them. You can deduct your health insurance premiums, including dental and long-term care insurance (deductions are limited to the amount of earned income). Other medical expenses, including alternative medicine, are also eligible for deduction.
How much does health insurance cost to freelancers?
The US is one of the most expensive countries to live in. This is why freelancers must understand how much health insurance costs, where they can get it from, and what options are available. In the US, health insurance coverage is something that most people have to take care of themselves because there are very few options for employers to offer their employees.
The average cost of a freelance employee’s health care premiums is $495 per month or $5940 annually. If you get that tax deduction, you can make it come down to $200 every month. Health insurance deduction is calculated based on a person’s taxable wages, filing status, and employer-provided coverage. If one does not get coverage through their employer, they must buy their plan on the open market. Most people can deduct 100% of their health insurance premiums from their taxes, up to the maximum allowed by law.
Various deductible health insurance plans for freelancers?
- If you bought coverage through the government Marketplace, this is known as the health insurance premium tax credit, where your tax is deductible. The Health Insurance Marketplace offers Americans without access to affordable coverage through their job the opportunity to purchase quality coverage, often at a lower cost.
- The self-employed individual can purchase coverage from outside their employer through a group market like COBRA.
- The Affordable Care Act says that if one works independently and buys health insurance for self or a family, it may be tax-deductible.
- Singles who are self-employed may not have an option to deduct their employer’s health insurance premiums. To waive this requirement, they must have another person (either spouse or a dependent) covered by the policy. The spouse or dependent must be on the same plan as the self-employed, and it has to be in place for all 12 months of the tax year.
- Health savings accounts allow freelancers to set aside money pre-tax for qualified medical expenses, reducing the expense amount subject to federal income tax. Health savings accounts provide an excellent way for many freelancers to save money on taxes and thus can they control their healthcare expenses. However, there are also some drawbacks. First, the funds in your account can only be spent on qualified medical expenses, so if you don’t have any qualified medical expenses in that year, you will not get any funds back from your account. Secondly, your deduction may be reduced or canceled if you go over the maximum allowed for HSA contributions.
- Freelancers can also opt for Medicaid options.
How to claim your health insurance deduction?
For claiming this health insurance deduction, one needs Form 1040. This Federal tax form helps you itemize your deductions. To claim a self-employed health insurance deduction, you need to show that your net income from working independently is optimistic; in other words, you had more in business expenses than in revenue from your business. If your net income was zero or negative, the deduction for health insurance does not apply to you.
How is AI-powered platform helping to resolve this issue?
Health data and billions in claims are pouring into insurance companies. They want to use artificial intelligence and machine learning to interpret this information to serve their customers better and improve the health care industry.
Making a sound investment in health insurance means choosing the right plan to protect against possible irregularities in your future. Flying is one such platform that helps turn this task into a simple one – using artificial intelligence to help everyone find the perfect plan for their needs to focus on what’s important. FlyFin’s cutting-edge technology uses machine intelligence to help make better health care decisions for its customers. Combining big data with artificial intelligence can nurture prospects by delivering personalized experiences at each step of the consumer journey. The platform quickly gathers all options and makes them easy to understand to decide what’s best for the client for health insurance deduction. By mining data from more than tons of health insurance plans and their products from across the United States, their proprietary algorithm optimizes the results to provide the client with a bespoke plan specifically suited to their needs.
Summary
Can we make buying health insurance simpler? FlyFin’s highly configurable artificial intelligence-powered platform makes it easier for freelancers to avail themselves of health insurance deduction in a very systematic and efficient way from the comfort of their home. One should try this software.
