Self-Employed January 2024 ACA Marketplace Premium Prepaid in December 2023

[JAW1974]

I started my own business in May 2023 and paid for COBRA insurance coverage through December 2023. I understand those COBRA premium payments are only deductible as part of itemized medical expenses.

I signed up for ACA marketplace coverage to start in January 2024, and I paid the January premium in December 2023.

From what I have read, I should be able to deduct the prepaid January premium as a self-employed health insurance expense on my 2023 tax return. The ACA marketplace, however, does not issue a 2023 form 1095-A for this prepayment. Where do I enter this as a 2023 expense? I cannot use the ACA section in the Medical Deductions & Credits section because I don't have a 1095-A. The Self-Employed Health Insurance Paid section under Wages & Income tells me not to enter marketplace premiums. So do I just enter this as a business expense in the self-employment income and expenses section, like where I enter other business expenses?

[DavidD66]

You do not enter a health insurance payment for yourself as a business expense.  If you want to enter for 2023, enter as Self-Employed Health Insurance Paid section under Wages & Income, even though the program says not to.  It says not to because you can only deduct the net cost after any premium tax credit.  When you file your 2024 tax return and complete form 1095-A, you may have to repay a portion of any premium tax credit you are receiving.   Therefore, I recommend you wait and report it on your 2024 tax return.

As for your Cobra payments, if you paid those premiums with after tax funds, you can deduct them for any month you were self-employed.  If they were deducted pretax from severance payments they are not deductible.   

[JAW1974]

Thank you - reporting on the 2024 tax return does make sense.

In terms of COBRA, just clarifying my understanding...the COBRA premium payments are not eligible to be used for the self-employed insurance deduction because the plan was under my former employer's name. The premiums, however, can be claimed as medical expenses in Schedule A (subject to the 7.5% AGI test).

[DianeW777]

Yes, that is correct since they are paid with after-tax dollars, meaning you pay the premiums directly with your own funds. if you itemize deductions you can use the COBRA premiums you pay.