I Got My Health Insurance Subsidy

Photo credit: Kate Williams, CC BY 2.0.

So after I had that conversation with my CPA, I decided I wasn’t going to wait around to see whether I was going to incorporate before I started saving money on health insurance premiums. I was going to log into Healthcare.gov and see what happened when I updated my income information to include what I planned to spend on my HSA and IRA.

I was expecting to have do a workaround to get the correct modified AGI; the original Healthcare.gov form asked me to report my income minus business expenses, and I planned on updating that form to include my income minus business expenses and HSA/IRA contributions.

However, it turns out I didn’t have to update the income-minus-business-expenses number at all… because the Life Changes form included a space for me to list HSA and IRA contributions.

As well as every other deduction on lines 23-35 of the 1040. Those lines include a lot of deductions for self-employed people, including the ability to deduct health insurance premiums. On a recent Oh My Dollar! episode, Lillian Karabaic said that deducting the cost of your premiums in order to pay lower premiums could get you trapped in a vicious circle — once your premiums are reduced, the amount you can deduct is also reduced, but that might make your premiums increase, etc. etc. etc. — but I cut that circle off before it began by deducting the number I was pretty sure would be my health insurance premium cost when the whole thing was finished.

Once I slotted my deductions in, Healthcare.gov told me I was eligible for a $365 monthly subsidy.

I elected to take $300 each month, just in case I earn a little more than I’m anticipating (if I don’t, I’ll still get that extra $65/month back when I do my 2018 taxes), and I’m going to keep a sharp eye on my business and personal expenses.

But… I was expecting to have to spend extra on my business just to save on health insurance, or open a SEP IRA just so I could deduct more expenses, and my ordinary everyday expenses seem to be enough!

I wish this had been part of the initial Open Enrollment process. Did I miss it somewhere? Either way, I’ve got my subsidy now — and I have to submit updated tax and income information by April 5 in order to keep it, which gives me an incentive to get my taxes done early this year.

This also gives me an incentive to max out my HSA ($3,450) and my IRA ($5,500) because that’s what I told Healthcare.gov I was going to do.

Most importantly: my monthly health insurance premiums are now down to $248.46 — which is what I guessed they would be when I deducted them from my health insurance application.

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