Confused by all the acronyms? You're not alone!
What it is: A tax deduction that lets self-employed people subtract health insurance premiums from their taxable income.
Where to claim it: Schedule 1, Line 17 of your Form 1040
Why it matters: Reduces both your taxable income AND your MAGI (which can increase your Premium Tax Credit). This is the "double benefit" most freelancers miss!
💡 Example: You paid $12,000 in health insurance premiums and are in the 22% tax bracket. SEHID saves you $2,640 in federal taxes (plus state taxes). But it also reduces your MAGI, which might increase your PTC by another $1,000+.
What it is: A federal subsidy that helps lower- and middle-income people afford health insurance purchased through the ACA marketplace (Healthcare.gov).
How it's calculated: Based on your household income, household size, location, and the cost of the Second Lowest Cost Silver Plan (SLCSP) in your area.
When you get it: Reconciled when you file taxes using Form 8962. This compares what you received (APTC) vs. what you actually qualified for (PTC).
⚠️ Key fact: You might owe money back if you received too much APTC during the year, or get a refund if you received too little. This catches many freelancers by surprise!
What it is: The Premium Tax Credit paid in advance directly to your insurance company each month (so you pay less upfront).
How it works:
💡 Example: You estimated $50,000 income and received $300/month APTC ($3,600 total). But you actually earned $60,000. When you file taxes, the IRS calculates that you only qualified for $2,000 PTC. Now you owe $1,600 back to the IRS.
✅ Pro tip: Update your income estimate on Healthcare.gov quarterly to avoid owing money at tax time!
What it is: The benchmark plan used to calculate your Premium Tax Credit. It's literally the second-cheapest Silver-tier plan available in your area for someone your age.
Why it matters: Your PTC is based on the SLCSP cost, NOT the plan you actually chose. This means:
Where to find it: Listed on Form 1095-A (Column B) or viewable on Healthcare.gov when comparing plans.
✅ Fun fact: You can choose a Bronze plan with a $500/month premium, but if the SLCSP is $800/month, your PTC is calculated as if you're paying $800. You keep the extra subsidy!
What it is: Your Adjusted Gross Income (AGI) plus certain deductions added back in. Used to determine eligibility for tax credits and subsidies.
How to calculate it:
MAGI = AGI + tax-exempt interest + foreign income + certain deductions (excluding SEHID)
Why it's tricky: SEHID reduces your MAGI, which increases your PTC. But you need to know your PTC to calculate SEHID (since PTC affects your final MAGI). It's a circular calculation that requires iterative solving!
⚠️ This is why most calculators get it wrong: They use a simple formula instead of solving the circular dependency. Our calculator uses the official IRS iterative method to get precise results.
What it is: The minimum income level defined by the federal government, updated annually. Used to determine eligibility for various government programs, including ACA subsidies.
2025 FPL Guidelines:
How it affects you: Premium Tax Credits are calculated as a percentage of income relative to FPL. For example:
What it is: The IRS form you file with your taxes to reconcile the APTC you received during the year vs. the PTC you actually qualified for based on your final income.
When to file it: Every year if you received ANY amount of APTC (even $1/month)
What it does:
⚠️ Common mistake: Forgetting to file Form 8962 when you received APTC. This can result in penalties, back taxes, and losing eligibility for future subsidies!
✅ Good news: Most tax software (TurboTax, FreeTaxUSA, H&R Block) will automatically prompt you to file Form 8962 if you check the box saying you had marketplace insurance.
What it is: A form you receive from Healthcare.gov that shows your monthly premiums, APTC amounts, and SLCSP costs for the year.
When you get it: By early February (for the previous tax year)
Why you need it: Required to complete Form 8962 for PTC reconciliation. You can't file your taxes without it!
Where to find it:
✅ Pro tip: Download your Form 1095-A as soon as it's available (usually late January) so you can file taxes early if needed.
What it is: The comprehensive healthcare reform law passed in 2010 that created the Health Insurance Marketplace and Premium Tax Credits.
Key features:
Why freelancers care: The ACA marketplace is often the only affordable option for self-employed individuals who don't have employer-sponsored insurance.
What they are: Temporary expansion of ACA subsidies passed in the American Rescue Plan Act (2021) and extended through December 31, 2025.
Key changes:
⚠️ Status: Set to expire December 31, 2025, unless Congress renews them
Impact if they expire:
Source: KFF.org - November 2024
✅ What to do: Calculate your costs NOW under both scenarios (with and without enhanced subsidies) so you're prepared for 2026 regardless of what Congress decides.
Use our calculator to see how these terms apply to YOUR specific situation.