Since we live in what is being called a gig economy where there are more gig earners, there are also some considerations when purchasing healthcare. You will need to understand many factors if you are self-employed or own your own small business before making any decisions on health insurance.
Those who are self-employed or small business owners know that it is tough to get sick since you generally don’t have sick days. In most cases, gig-type jobs are paid only on completion of the work and therefore have no coverage for income should you get sick or injured.
This coverage is why it is essential for freelancers. The self-employed have proper health insurance, life insurance, and possibly insurance to cover expenses for any longer-term illness or injury. Here is everything you need to know about insurance and taxes for the self-employed.
Health Insurance Can Reduce Taxes
Private health insurance for a self-employed person is a deductible expense and not only for them but also their families, but it can be deducted for all your dependents since each would have their coverage individually under your plan.
It means that the taxable base for which a self-employed person has to pay will be considerably reduced. Therefore, along with other deductions, you can score some hefty deductions from your insurance premiums, saving you hundreds on your taxes.
How does the deduction of health insurance affect companies?
Companies who offer their employees health insurance and pay some of the premiums of those employees can see a significant tax break also.
For tax purposes, this medical insurance is treated as a social expense concerning corporate Tax. That’s why once the corporate profits of the fiscal year in question have been obtained, the corresponding amount will be subtracted, giving a significant deduction to the company that offers its employees’ health insurance.
How does the deduction of health insurance affect the worker?
As we all know, the compensation in kind applied by the companies also obliges the employee to pay their part in the premiums. Some deductions can be made, but they are not as significant as those for the self-employed since they take on the entire cost and tax burden before deductions.
It is best to hire a tax professional to handle your taxes as they will understand what you can and cannot deduct. If you do your taxes, look into the deduction of your premiums whether you are self-employed or working for a business.
How does health insurance affect the self-employed?
A private individual who chooses the option of purchasing health insurance will perhaps get the biggest tax break to the individual taxpayer due to all of the premiums falling on their shoulders. These are considered business-related expenses and therefore qualify for a tax deduction. This could add a significant deduction to your taxes depending on the tax laws’ premiums and the limit set.
Conclusion
There are many considerations for income, health insurance, life insurance, business expenses, and taxes when it comes to the self-employed. It would be prudent to hire a professional accountant to ensure you have all your financial ducks in a row.
The tax laws are complicated. However, if you are an employee with taxes deducted and no deductions to factor in, most taxes for the average worker are fairly simple and straightforward. If you are a self-employed individual, taxes can be much more complicated.
Due to the strictness of tax laws and the Internal Revenue Service (IRS) functions, your taxes must be correct. Also, it is crucial that you, as the individual taxpayer, get all the deductions and other tax benefits you can get when submitting your tax forms. It could mean the difference of hundreds of dollars.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
