Self-employed
Coverage when your income is your own problem
Figures on this page checked . Medicare and marketplace numbers reset every year — if you are reading this long after that date, call and we will tell you what moved.
What the application is asking for
Net self-employment income for the whole coming year, after business expenses. Not gross receipts. Not last month multiplied by twelve. Not last year, unless last year is your best guess at this year.
The technical answer is your modified adjusted gross income, which for most self-employed households means the profit that lands on your Schedule C, plus any other income in the household, minus the adjustments that come off before adjusted gross income.
- Counted: net business profit, a spouse’s wages, interest and dividends, taxable retirement withdrawals, rental income, unemployment.
- Not counted: money you move from savings, loan proceeds, gifts, most child support.
- Subtracted before the test: deductible retirement contributions, half your self-employment tax, and the health insurance deduction described below.
That last line is why two households with identical revenue can qualify for sharply different help. A SEP-IRA contribution you were going to make anyway changes the number the marketplace looks at.
Estimating a number you cannot know
Everybody in this position feels like they are guessing. You are, and that is what the form expects. The estimate is not a promise and getting it wrong is not fraud — it is a reconciliation on next year’s tax return.
What we tell people to do instead of agonizing over it:
- Start with last year’s net profit, then adjust for what you already know has changed — a client gained, a contract ending in June, a rate rise.
- If your income swings widely, estimate toward the middle rather than toward the bottom. Estimating low feels safe and produces the repayment nobody budgets for.
- Write down how you got to the number. When you update it in August you will not remember what you assumed in November.
The habit that separates a good year from a bad one
Update your estimate when something material changes, not at the end of the year. Telling the marketplace in March costs you a phone call and adjusts your monthly help. Discovering it in April of the following year costs you a repayment.
We do this update with our clients rather than leaving it to them to remember, and it is the single most useful service we provide to self-employed households. How the credits themselves work is on its own page.
The deduction, and the rule that takes it away
Self-employed people can generally deduct their health insurance premiums directly against income, without needing to itemize. It is limited to the earned income from the business the plan is established under, so it cannot exceed your profit.
The month-by-month rule people miss
You cannot take the deduction for any month you were eligible to participate in a subsidized employer plan — yours, or your spouse’s. Eligible, not enrolled. Declining your spouse’s employer coverage does not restore the deduction, and this is the version people get wrong.
The two numbers also chase each other: the deduction lowers the income the premium tax credit is calculated on, and the credit changes the premium the deduction is based on. The IRS publishes two accepted methods for resolving it, and tax software implements them.
That is as far as we go. We are licensed to advise you on insurance, not on your tax return, and the interaction above is a question for whoever prepares it. What we can do is make sure the income estimate underneath it is right.
What arrives in the post in January
A Form 1095-A from Connect for Health Colorado, listing what your plan cost each month and what advance credit was paid on your behalf. Your preparer needs it, and the return cannot be finished correctly without it.
In plain terms
“I never got one” happens most often after a move or an email change. It is available in your Connect for Health Colorado account, and we can point you at it. Filing without it, or guessing at the numbers, produces a letter from the IRS several months later.
Colorado Premium Assistance works differently from the federal credit here: it is not advanced against a tax return, so there is nothing on that portion to reconcile or repay.
Grove Benefit Advisors, LLC is a certified broker with Connect for Health Colorado and is not a government agency or the marketplace itself. Plan availability, networks, and pricing vary by county. Any savings figure shown here is illustrative; final eligibility for a premium tax credit is determined by Connect for Health Colorado on your application.
Choosing a plan when nobody is subsidizing you
Without an employer covering most of the premium, the arithmetic changes. Two factors matter more for self-employed households than they do for people with group coverage.
- Cash flow, not just the annual total. A lower premium with a higher deductible can be right, but only if a bad month would not force you to skip care. Your income already varies; your coverage should not add variance you cannot absorb.
- Whether a health savings account fits. A qualifying high-deductible plan lets you deduct contributions and spend them on care. For a profitable year that combination does real work; in a thin year it is money you cannot reach for anything else.
If your income is close to a threshold where help changes sharply, say so when we talk. Sometimes a retirement contribution moves a household across a line and changes the whole year. Better to know that in November than in April.
Questions from self-employed clients
My income swings by tens of thousands. What do I put down?
Your best projection of net profit for the whole year, estimated toward the middle of your likely range rather than the bottom. Estimating low feels cautious and produces a repayment at tax time, which is the opposite of cautious.
Then update it when something real changes — a contract signed, a client lost, a quarter that came in far off plan. Updating mid-year adjusts your monthly help and is a phone call. We do this with our clients rather than waiting for them to think of it.
My spouse has coverage at work. Can I still buy my own plan?
You can buy one, but two answers change. If their employer plan is offered to you and counts as affordable, you generally cannot get a premium tax credit on a marketplace plan — so you would pay the full price.
And for the self-employed health insurance deduction, being eligible for their subsidized plan disqualifies you for those months whether or not you enrolled. Declining it does not help. Run both questions before deciding, because the answer sometimes makes the group plan cheaper than it looks.
I just went self-employed mid-year. When can I enroll?
Losing your job-based coverage opens a 60-day special enrollment period, and you can start the application up to 60 days before your last day of coverage so the new plan begins when the old one stops.
Do not wait until the coverage has ended. Starting early is what avoids the gap, and the clock runs from the event rather than from when you got organized.
Can my business just pay for the plan?
How you pay for it matters less than how it is reported, and the right answer depends on whether you are a sole proprietor, an LLC, or an S corporation — S corporation owners in particular have specific reporting requirements for this to be deductible.
That is a question for your accountant rather than for us. What we can tell you is which plans are available to you and what they cost, which is the input your accountant needs.