Navigating Health Insurance as a Self-Employed Professional: What You Need to Know

The cost of health insurance is usually the biggest factor in choosing when to take the leap into self employment. Being your own boss comes with a lot of freedom, but it also brings the responsibility of securing your own health insurance. For self-employed individuals, this often means turning to the Health Insurance Marketplace. Understanding how your income affects your health insurance options, especially when it comes to subsidies, is crucial.

Marketplace Insurance: A Lifeline for the Self-Employed

The Health Insurance Marketplace offers a variety of plans that can fit your budget and healthcare needs. One of the biggest benefits is that if your income falls within certain limits, you may qualify for subsidies that make your monthly premiums more affordable. But how exactly is this subsidy calculated?

Understanding Adjusted Gross Income (AGI) for the Self-Employed

There area few factors that determine the cost of health insurance like zip code, birthdays and household size, but the biggest factor is income. The subsidies is the amount of help you get towards your monthly premium. Subsidies are based on your Adjusted Gross Income (AGI), which is essentially your total income minus specific deductions. For self-employed people, this number is a bit more complex to calculate. Your AGI includes all your business income, but you can subtract expenses like:

Home office deductions: If you have a dedicated workspace at home.
Vehicle expenses: If you use your car for business purposes.
Supplies and equipment: Any materials or tools you need to run your business.
Depreciation: The decrease in value of large assets, like a computer or machinery.

Estimating Income: The Early Years of Self-Employment

In the first few years of self-employment, it’s common not to have a clear picture of your annual income. This uncertainty can make it tricky to estimate your AGI for Marketplace purposes. Fortunately, at Utah Avenue Insurance, we can help you navigate this uncertainty by providing income ranges and discussing different scenarios. If your income fluctuates during the year, you can update your income estimate at any time, which helps you limit any unexpected tax penalties when you file.

Avoiding Tax Penalties

The Marketplace allows you to update your income throughout the year, which is crucial if your business takes off faster than expected or if things slow down. By keeping your income estimate accurate, you can avoid owing money at tax time due to overestimating your subsidy. A local agent at Utah Avenue can go over your income estimates so that you know that you are not overpaying for your health insurance.

Common Deductions for Business Owners

Many business expenses can reduce your AGI, and knowing these can help you plan your finances more effectively. Common deductions include:

Advertising and marketing costs
Professional fees (like accounting or legal services)
Travel and meals (related to business)
Office supplies

Let Utah Avenue Insurance Help You Find the Right Plan

Navigating health insurance as a self-employed individual can feel overwhelming, but you don’t have to do it alone. Our experienced agents at Utah Avenue Insurance are here to guide you through the process, help you estimate your income, and choose a plan that fits your budget. We’re here to ensure that you get the coverage you need without any surprises come tax season.

Your self-employment journey is an exciting one—let us help you protect your health while you build your business.