Can we deduct health insurance premiums, if we made more money than expected, self employed, and have to pay back the tax credit that we received through the marketplace?

My husband has small hobby business income besides his wages from an employed job and I have business income through massage therapy.

We have combined made a lot more money in 2019 than expected and will have to pay back the total amount of premium tax credit received through Covered California.

Through the marketplace we were signed up under my husbands name as primary and me as spouse. His business income is low with it just being a hobby. Can I enter the health care cost including repayment as an expense under MY business income?

DavidD66
Expert Alumni

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If you’re self-employed and not eligible for an employer-sponsored health plan through a spouse’s job, you may be eligible to write-off your health insurance premiums on your taxes. However, you can’t write off more in health insurance premiums than you earned.

 

If you received a subsidy or premium tax credit to purchase a health insurance plan in the Health Insurance Marketplace through the Affordable Care Act, any advanced-payment subsidy that lowered the cost of your health insurance premiums cannot be claimed as a tax deduction. However, the money you paid out of your own pocket for your premiums might be tax deductible.

 

For 2019 you can deduct your out of pocket premium costs plus the amount of the premium tax credit that you have to pay back.

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Thank you so much for your input on this matter David!

Since my husband and I are married and filing jointly I was just also wondering if we have to show the healthcare expense under my husbands hobby business (which only had little income) since the California Care was under his name with me as spouse. Or am I able to show the expense under my business which had more income than the expense. I'm hoping since we are married filing jointly I can do that?

 

LeonardS
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Your statement "my husband’s hobby business (which only had little income) " may be a cause for concern.  If your husband’s business is a "hobby business" the IRS will not consider him to be self-employed.  To be considered as self-employed you must show an intent to make a profit.  You may want to report health care expenses under your business if your husband’s business is truly a "hobby" business

 

Hobby income is reported on Schedule 1 Form 1040 Part 1 Line 8 "Other income".  This income will not be subject to self-employment tax.  You can only deduct hobby expenses up to the amount of your hobby income.

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