Key Takeaways
- A self-employed 60-year-old and her 59-year-old husband made $124,000 last year and face $2,700 a month for health insurance. For 2027 Marketplace coverage, the premium tax credit ends above 400% of the poverty line, which is $86,560 for a couple.
- Measured against what they made, they’re $37,440 over that line, but the credit is based on household income, which starts from adjusted gross income.
- The self-employed health insurance deduction could take up to $32,400 a year of premiums off that income. It’s capped at her business’s profit and applies only in months when neither of them can get a subsidized employer plan.
- Pre-tax saving in a solo 401(k) is the second lever, but with $46,000 of debt, finding the cash is the hard part.
If you buy your own health insurance before Medicare, next year’s prices are showing up now, during open enrollment, and some of them hurt. But if you’re self-employed, you have more control than most people over the income that decides whether you get any help paying them.
That could be very good news for a 60-year-old who posted in r/personalfinance this week. She’s self-employed, her 59-year-old husband works on straight commission, and together they made $124,000 last year. She just found out their health insurance is going up to $2,700 a month, which is more than their mortgage. In her words, they’re “cliff dwellers” who “make too much to qualify for subsidies.”
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The cliff for two is $86,560
The premium tax credit on Marketplace coverage goes only to households with income from 100% to 400% of the federal poverty line for their family size. Congress lifted the 400% cap for tax years 2021 through 2025 and hasn’t extended that, so for 2027 coverage, a dollar over the line means no credit at all. The line for 2027 comes from the poverty guidelines HHS published in January: $21,640 for a household of two. Four times that is $86,560.
So if they make about what they made last year, the couple is $37,440 over. Since the credit is all or nothing, they have to get under the line for any of it to count: Cutting $30,000 wouldn’t help. The post doesn’t say their plan is a Marketplace plan, but I’d bet that’s the cliff she means.
That $86,560 is for a household of two. If they claim their 23-year-old as a dependent, the household is three, and the line is four times $27,320, or $109,280, which leaves them $14,720 over. That child’s income would count toward theirs too, if it’s high enough that the child has to file a return.
Her premiums can come off the top
The credit is based on household income, which starts from adjusted gross income, and that can come in well below what a self-employed filer brings in. Half her self-employment tax already comes off before AGI. On top of that, the self-employed health insurance deduction, claimed on line 17 of Schedule 1, lets her deduct premiums for coverage set up under her business for herself, her husband and their dependents. At $2,700 a month, that’s up to $32,400 a year, most of the $37,440 gap.
The deduction has two limits. It can’t be more than her net profit from self-employment, and it doesn’t apply in any month when either of them could get a subsidized employer plan. The post doesn’t say how much of the $124,000 is her profit, or whether his commission job offers coverage, so there’s no telling yet whether this alone gets them under. It could still close much of the gap.
Their taxable share of a rental property they own through an LLC counts as income too, if it isn’t already in the $124,000 (the LLC pays them $1,000 a month). And if they do get under the line, the deduction and the credit together can’t be more than the premiums. IRS Publication 974 shows how to figure the two at once.
A solo 401(k) has room for the rest
The second lever is pre-tax retirement saving, which also comes off AGI. As a self-employed 60-year-old, she can open a solo 401(k), and at 60 she gets the larger catch-up the law allows workplace-plan savers from 60 to 63. Its limits have room for all $37,440, as long as her business earns enough to support it.
The cash is the problem. They owe $46,000 between $16,000 on credit cards, $22,000 in student loans and $8,000 in medical bills. They also have a small emergency fund, plus a garage door, a car and a sick dog to pay for. Putting $37,440 a year into a retirement account is a tall order on top of all that, so the more of the gap the deduction covers, the better.
Watch the estimate in open enrollment
On HealthCare.gov, open enrollment for 2027 coverage runs through Jan. 15, and picking a plan by Dec. 15 gets coverage that starts Jan. 1. When they apply, they’ll have to estimate next year’s income, and their income changes from month to month. Since there’s no repayment cap on advance credit payments for tax years after 2025, if they estimate under $86,560 and end the year over it, they pay back every dollar at tax time. They can also skip the advance payments and claim the credit when they file, once they know the year’s income.
Frankly, I’d start with the deduction, since it only asks them to deduct money they’re already spending. The 401(k) can cover whatever’s left as the cash allows. The line for 2028 coverage will follow the guidelines HHS publishes next January, and she reaches Medicare at 65 about a year before he does, so they’ll have to run these numbers every year until then.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
