2 Money-Saving Medicare Moves for the Self-EmployedPosted by Medicare Made Clear
If you’re self-employed and have Medicare, you may not realize how self-employment may affect your Medicare choices.
1. Medicare Premium Payments May Be Subtracted from Income for Taxes
A recent change to the IRS tax code allows certain self-employed people to deduct the entire amount they pay in Medicare premiums from their self-employment income. This includes premiums paid for any parts of Medicare – A, B, C or D.1
Total premium payments are subtracted from gross income to arrive at the adjusted gross income, or AGI. This is different from the itemized deduction for dental and medical expenses that may be taken after the AGI is calculated. There is no spending threshold to meet. Premium payments may be subtracted starting with the first dollar spent.
Each person’s tax situation is different, so ask your tax advisor to find out if this change applies to you. The impact on your tax bill could be significant.
2. Medicare Part B Enrollment—and Premium Payments—May Be Delayed
Most people sign up for Part A as soon as they turn 65. That’s because they get it without having to pay a monthly premium. But Part B comes at a cost.
Some self-employed people with other health coverage, like through a spouse’s employer, might want to delay Part B enrollment to avoid paying the Part B premium. Others who don’t have coverage should sign up for Part B as soon as they are eligible. Otherwise they may have to pay a late enrollment premium penalty.
Self-employed with Marketplace Coverage
If you are self-employed and you have a Marketplace plan, you can keep it until your Medicare coverage starts. Then you can cancel it without penalty. You can also keep your Marketplace plan, but if you’ve been getting tax credits or lower out-of-pocket costs on a plan you bought through the Marketplace, these savings will end once your Medicare Part A coverage starts. If you keep your Marketplace plan, the Marketplace plan becomes secondary coverage after Medicare.
Self-employed with Employer Coverage
Self-employed people who work another job and get health benefits or who get coverage through a spouse’s current job may wait to enroll in Part B without penalty. However, workplaces with fewer than 20 employees may require employees to sign up for Medicare at age 65. The employer health plan then becomes secondary coverage after Medicare.
Self-employed with Retiree Coverage
Self-employed people with retiree coverage should check with their benefit administrator to understand their retiree plan requirements. The retiree plan becomes secondary coverage once you’re on Medicare. It may still continue as the main insurance for a younger spouse and dependents.
Many people may not realize how self-employment may affect their Medicare choices. If you have additional questions about Medicare or your private health plan, you can get personalized health insurance counseling at no cost to you from your local State Health Insurance Assistance Program (SHIP). If you have tax-related questions about Medicare premium payments, talk to your tax consultant.
For more information, explore MedicareMadeClear.com or contact the Medicare helpline 24 hours a day, seven days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048.
1 Self-Employed Health Insurance Deduction, IRS, September 9, 2015