Health Insurance and Tax Breaks: New Rules for the Self-Employed

If you, your spouse or an adult child is self-employed, no doubt you already know just how expensive insurance is in the individual market.  Moreover, you know how difficult is to find comprehensive coverage when you’re buying your own insurance.  For example, most policies don’t cover pre-natal care, or child-birth– a huge problem for young women.

But under the Affordable Care Act everything changes. Beginning in January, you will be able to purchase a policy in your state’s Exchange—a one-stop marketplace where you can shop for plans. They will be easy to compare because all policies sold in the Exchanges must cover “10 essential benefits”  including pre-natal care, maternity, dental and vision care for children, rehab and mental health care.  There will be no no co-pays for preventive care and the deductible does not apply.No matter how much care you or your family need, there will be a cap on your out-of-pocket expenses of roughly $6,000 for a single individual or $12,000 for a family. (These rules apply to anyone buying their own insurance in the Individual Exchange, whether they are self-employed, unemployed, or work for an employer who doesn’t offer affordable, comprehensive health benefits.)

                                 Lower Premiums, Subsidies

In the Exchange, you will automatically become part of a large group, and as a result, premiums will be lower than the premiums you would papy today for similar coverage.

 Moreover, depending on your income, you may be eligible for a subsidy. For example, a 30-year-old couple with joint income of $45,000 would receive a subsidy of roughly $2700 and wind up paying $4,000 a year for comprehensive coverage that includes free preventive care. (This is a national average)  

 What You May Not Know about Health Insurance and Tax Deductions

You probably are aware that if you are self-employed and buy your own medical, dental or long-term care insurance, you can deduct premiums for an individual or a family plan on your income tax.

But did you know that if:  

You Have Children under 27, you also can deduct premiums you pay for  them–even if they are no longer your dependents?  

 You or  Your Spouse Receive Medicare, the IRS has now ruled that you can deduct Medicare premiums for Parts A, B, C and D?  This is in addition to the deduction for insurance that you or your spouse buy in an  Exchange.

                              How Much Can You Deduct?

To calculate your allowable health insurance deduction, take your self-employment income, and subtract the 50% deduction for self-employment taxes. Then subtract any retirement contributions made to SEP-IRA, SIMPLE-IRA, or Keogh plan. The remainder is how much you can deduct for health insurance expenses.

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What the Sequester Means for Health Care, Education and the Exchanges (In-depth Analysis); Will “Looking Stupid” Motivate Legislators to Compromise? Why the GOP Would Rather Cut Defense than Close Loopholes

Before looking at precisely who will be hurt by of government-wide sequester cuts on health and education, it’s worth considering the possibility—however slim—that legislators still might reach a budget agreement that brings an end to these blind, across-the-board blows to government spending.

Earlier this week Senator Mark Warner told Bloomberg News that he places the odds for a bipartisan debt-reduction deal at better than 50-50.

Why the optimism?  

Warner, who isn’t a political naïf (he served as Virginia’s governor from 2002 to 2006), believes that ultimately law-makers will arrive at a compromise because as he puts it: “looking stupid at some point has got to motivate people.” 

Granted, this is Warner’s first term in the Senate. This could mean that he doesn’t yet understand the ways of Washington. On the other hand, the fact that he’s new to the beltway could mean that he’s still able to think clearly.

As he reminded his Congressional colleagues Wednesday morning: “These cuts were set up to be the stupidest way possible. No rational group of folks would allow them to come to pass.”

Warner is right. NO ONE wanted cuts that Republicans have rightly called “mindless and random.”  That was the point of the Sequester deal forged during a 2011 deficit-reduction agreement. Legislators purposefully chose targets that were so unpopular that everyone assumed that neither party would ever let them occur.  Conservatives wouldn’t countenance slashing military funding by 7.9%, Democrats wouldn’t accept deep cuts to social programs that our most vulnerable citizens need.  They would have to find a compromise. Or, at least, that was the theory.

Instead, Democrats and Republicans deadlocked, and now it seems that they have double-dared themselves into an impossible situation. Sequestration will increase unemployment, weaken the economy, and hurt children, seniors and the military. Even the Border Patrol will take a hit.  More public school teachers will lose their jobs.

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