December 15th is the deadline to register with Healthcare.gov. Don’t roll your eyes thinking this doesn’t apply to you. I’ve had clients paying close to $2,000 a month for health insurance unnecessarily. Because they bought their policy through a broker, they can’t get any of it back. Selecting a plan through healthcare.gov is the only way you can get premium tax credits and subsidies. Most who think they don’t qualify are mistaken.
The deadline for healthcare.gov participation is tomorrow, December 15th. Think long and hard before you dismiss this as a wise option. It may cost you more than your annual mortgage payment.
Here’s the thing – what you get through healthcare.gov is the exact same insurance you get off the street. This isn’t welfare. You’re paying taxes to support premium tax credits and subsidies. It’s crazy not to capitalize on money your government is collecting from you to support these programs.
Think about it like you would your standard deduction on a tax return. In 2020, this ranges from $12,400 to $24,800. You’re entitled to this. It’s the law. The same goes with healthcare subsidies and tax credits. For health insurance, it’s decided based on what you claim as income, not the actual figure, because it’s determined by estimated future income. Where this becomes a big deal is on tax credits. If you overestimate your net income and assume you won’t qualify for tax credits, you lose if you decide to avoid healthcare.gov registration as a result.
If you make under $45,000 gross, you qualify for subsidies. It’s the exact same insurance you get if you buy direct. Anthem and other health insurance companies only make so many products available in a region. It’s based on area demographics. All those options offered direct to consumers are the exact same policies available on healthcare.gov. But here’s the bigger rub – if you don’t run your policy order through healthcare.gov, you won’t qualify for tax credits either.
I had one retired client put his income down as $60k, assuming he didn’t qualify. What he didn’t consider was his other deductions. This hurt his cash flow all year long. Premiums are correlated to your tax return bottom line, not your net income. It’s important to work with your tax professional to ensure you’re using strategies to reduce your reported income as much as possible.
Business owner tax opportunities
For entrepreneurs, SEHI (self-employed health insurance) premiums can be 100% deductible. Even if you messed up and failed to select your health insurance plan through healthcare.gov, you ought to consult with a savvy tax professional to ensure you at least get this straight on your 2020 tax returns.
There’s an art to calculating qualified business income deductions and a variety of other tax benefit strategies for the self-employed. The thing is, you need to do this before the year ends to make sure the numbers you log on your tax return don’t kick you out of qualifying for some pretty substantial tax relief opportunities.
If you’re looking for a bright spot in 2020, and it sure has been a pretty dim year for most of us, schedule a free 15-minute strategy session with me and I’ll get you pointed in the right direction to help you reduce your tax liability this year. Don’t delay. Decisions you make before 2021 rolls around could have a huge impact on the taxes you owe – or get back, come April.
