Health care deductions

[jafusia]

Beginning in March of 2023, I started doing contract work and did not have access to company healthcare any more. To complicate matters, I do not have a have estimate of how much I make each year because it fluctuates dramatically depending on the amount of work I am able to find. I went through the ACA marketplace and we determined an estimated amount that I knew I would earn and paid reduced premiums accordingly. At the end of the year, I did my taxes and it was determined that the amount I made did not entitle me to any healthcare offsets so the difference of what I paid versus what I should have paid was trued up and deducted from my return. In essence I paid the monthly premiums in full so shouldn't the premiums be deductible since they were taken from my return? I've never had this kind of insurance so I am unsure of what should take place but it seems it would be no different than me paying the entire month upfront instead of via my refund. Also, how are medical deductions calculated to see if they are deductible or not? Is it based on a percentage of AGI or gross income and what is the percentage? Thanks in advance

[VolvoGirl]

Yes if you have a net profit on your contract work it will calculate the medical deduction.  It is a complicated circular calculation.  You only enter it from the 1095-A. When you enter the 1095A there should be a box to check for self employment. If you enter the 1095-A and select the "Self-employed and bought a Marketplace plan" box, it will automatically include those premiums in the SE Health Insurance section. So you shouldn't enter it again on schedule C.

Self Employed health Insurance does not go directly on Schedule C so it will not reduce your Net Profit or self employment tax.  Self-employed health insurance deduction goes on Schedule 1 line 17 (which goes to 1040 line 10).

If it does exceed your net self-employment income it gets split automatically. An amount equal to your net self-employment income goes on Form 1040 Schedule 1, and the remainder gets added in to medical expenses on Schedule A.

OTHERWISE for Schedule A,    You can only deduct the amount of unreimbursed Medical Expenses you actually paid over 7.5% of your AGI. So it might take a lot to be worth entering. And then all your itemized deductions have to be more than the standard deduction to get any benefit (so you would only be getting the benefit of the amount that puts you over the standard deduction). And since the Standard Deduction is increased more people will not need to Itemize.

[jafusia]

Thank you for the quick reply. I'm not self-employed but am picking up contract work and paid through and agency. I think the crux of my question stems from whether or not the amount in health insurance premiums taken from my refund (when my annual income was trued up. I submitted without making it part of my itemizations. I'm wondering if I should file an amended return to include these medical costs that were deducted from my return as I basically did pay that and how to do that. I do itemize and take more than the standard deduction already but I'm calculating approximately another $10k in out of pocket medical.

[VolvoGirl]

Will you be getting a W2 for the work or a 1099?  1099NEC, freelance, independent contractor, consulting, side job, sub-contractor are all the same thing Self Employment. You need to fill out a schedule C for self employment income.

Double check your schedule A for itemized deductions and see if it was automatically added there.  Remember you can only deduct the Medical over 7.5% of your AGI.  

[jafusia]

I receive a W2 and I have mortgage interest and other related deductions. The medical costs alone definitely will be over the 7.5% of AGI and with all deductions I do itemize above the standard deduction amount.