How the Affordable Care Act (ACA) helps Self-Employed Individuals Afford Health Insurance

The Affordable Care Act (ACA), also known as Obamacare, has made it easier for self-employed individuals to afford health insurance. Before the ACA, self-employed individuals were not eligible for premium tax credits or cost-sharing reductions to help lower their health insurance costs.

Under the ACA, self-employed individuals can qualify for premium tax credits if their income is below a certain level. These tax credits can be used to lower the cost of monthly health insurance premiums. Self-employed individuals can also qualify for cost-sharing reductions if their income is below a certain level. These cost-sharing reductions can lower the cost of deductibles, copayments, and coinsurance.

To qualify for premium tax credits or cost-sharing reductions, self-employed individuals must enroll in a health insurance plan through the Health Insurance Marketplace. The Health Insurance Marketplace is a government-run website where individuals and families can shop for health insurance plans and compare costs.

Calculating Your Adjusted Gross Income (AGI)

Your AGI is used to determine your eligibility for premium tax credits and cost-sharing reductions. To calculate your AGI, you start with your gross income. Gross income is all of your income from all sources, including wages, salaries, tips, self-employment income, interest, dividends, and capital gains.

From your gross income, you can subtract certain deductions, such as the standard deduction or itemized deductions. You can also subtract certain adjustments to income, such as alimony paid or contributions to a retirement account. The result of these calculations is your AGI.

Self-Employment Income

If you are self-employed, your self-employment income is considered earned income. Earned income is used to calculate your eligibility for premium tax credits and cost-sharing reductions. When calculating your self-employment income, you can deduct certain business expenses, such as the cost of goods sold, depreciation, and rent.

Health Insurance Premiums

When calculating your AGI, you can also deduct the cost of your health insurance premiums. This includes the cost of premiums for yourself, your spouse, and your dependents. Health insurance premiums can be paid pre-tax or post-tax. If you pay your premiums pre-tax, they will not be included in your gross income. If you pay your premiums post-tax, they will be included in your gross income, but you can deduct them when calculating your AGI.

Conclusion

The ACA has made it easier for self-employed individuals to afford health insurance. By understanding the rules for calculating your AGI, you can maximize your eligibility for premium tax credits and cost-sharing reductions. If you are self-employed and need help finding affordable health insurance, visit the Health Insurance Marketplace at HealthCare.gov.