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I'm married, expecting a child in early 2016. I'm a

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freelancer currently on an ACA...
I'm married, expecting a child in early 2016. I'm a freelancer currently on an ACA health plan and my husband works for a small startup that offers him (but not me) a high deductible plan that is inadequate. Knowing that we have a major medical expense coming up next year, we are considering getting a couples plan with better coverage/lower deductible on the ACA. My husbands employer will pay him what he now contributes per month for his plan (roughly 500/mo). This of course will be now taxable income, when it had been pre-tax. Furthermore, I do not expect to make much of a profit next year in freelancing and so it's possible I will not make enough to deduct our 16k in expected medical expenses (premiums +deductible/out of pocket) from my business income. What is our best course of action in terms of getting the biggest income adjustment at tax time. Total gross household income (based only on husbands income) could be in 120k range. My understanding is if we itemize we can only deduct ~ 4k based on that projected income, and an HSA would only protect 6500 of that amount, but can't be used for premiums which is the bulk of the expense. If we max out the HSA, we likely wouldn't meet the 10% threshold for itemization anyway. Is there a path that I'm missing?
Submitted: 2 years ago.Category: Tax
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9/28/2015
Tax Professional: emc011075, Tax adviser replied 2 years ago
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,242
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

First you can only deduct health insurance premiums up to the amount of your business income, not out of pocket or deductibles. Those expenses has to be deducted on Schedule A. HSA is usually the only options for higher income couples if a better plan is not available through the employer. No, you are not missing anything. Because of the restriction AGI cap, only very small percentage of people, 5 or 8%, can actually deduct some of the medical expenses.

Sorry, I know that's not what you wanted to hear. Let me know if you have any questions.

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Customer reply replied 2 years ago
Well I guess my real question is what is my best course of action. I'm already aware of the info you provided (addressed them in my question).
Tax Professional: emc011075, Tax adviser replied 2 years ago

Your best course of action would be to maximize your HSA and/or check with your spouse's employer if he offers better coverage. That's the only way to pay medical premiums pretax if you don't have enough business profit to take above the line self-employment health insurance deduction. ACA offers some high deductible plans where you can contribute to HSA but you will have to take in consideration other aspects. Depending on your health and expected medical expenses, a plan with lower deductible and no HSA might be a better option in the long run.

When it comes to co-pays and deductibles you may not be able to deduct them, just like 95% of others. Unfortunately there's no other way to deduct medical expenses.

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Tax Professional: emc011075, Tax adviser replied 2 years ago

Here's what can be a what cannot be deducted when it comes to medical expenses and how to deduct it:

http://www.irs.gov/taxtopics/tc502.html

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