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Whether you’re new to the world of freelancing or have been doing it for years, navigating health insurance when you’re self-employed can feel overwhelming and costly. But there’s good news! You may qualify for free or subsidized health insurance through the Affordable Care Act (ACA), which offers financial assistance to help cover your premiums. Let’s walk through what you need to know for 2025.

What’s a Subsidy?

A subsidy is financial assistance that helps lower the cost of health insurance purchased through the federal or state health insurance marketplace (beginning 11/1/24). These subsidies come in the form of premium tax credits. Your eligibility is determined by:

• The cost of health insurance in your area
• Your projected 2025 income
• The size of your household

Premium tax credits are available to individuals earning up to 400% of the federal poverty level (FPL). For an individual, this is around $62,000. For a family of four, it’s around $120,000. If you make less than this, you will almost certainly be eligible for a subsidy.

But if you make more than this, there are still subsidies that can help you! Under the American Rescue Plan Act (ARPA), these tax credits have been expanded to allow individuals making above 400% of the FPL to receive premium assistance. These individuals can still receive subsidies that will cap out-of-pocket premium costs if the price of a benchmark health insurance plan (second-lowest cost Silver plan in your area) exceeds 8.5% of their household income.

All of this to say that if a single individual is earning $70,000 per year (above 400% FPL), and the benchmark plan in their area costs $10,000 annually, they’d be expected to pay no more than 8.5% of their income ($5,950). The government would provide a subsidy for the difference, meaning they’d receive about $4,050 in subsidies. Beginning 11/1, you'll be able to fill out your information here to automatically find out what subsidies are available to you on the health marketplace.

How Do I Get a Subsidy?

Once you determine your eligibility, you have a few options for applying your subsidy:

1. Monthly Premium Reduction: Apply your premium tax credit evenly throughout the year to lower your monthly insurance costs.
2. End-of-Year Tax Credit: Apply the entire subsidy as a lump sum on your tax return.
3. Split Method: Use part of the credit for lower monthly premiums and the rest as a tax credit at year’s end.

Be sure to choose a plan during open enrollment (November 1, 2024, to January 1, 2025) to secure coverage. If you need coverage starting January 1, 2025, you must enroll by December 15, 2024.

How Do I Estimate My Income as a Freelancer?

Freelancers often struggle to estimate their annual income since it can vary. The government uses something called “MAGI” (Modified Adjusted Gross Income) to calculate your eligibility. For most, MAGI is similar to your Adjusted Gross Income (AGI) from your tax return.

If you expect to earn about the same in 2025 as you did last year, use your 2024 AGI as a guide. If you expect significant changes, you’ll need to make an educated guess. Starting with your 2023 or 2024 income can help you get close.

What Happens if My Income Estimate is Off?

If you overestimate your income, you may receive the remaining subsidy as a tax refund. Underestimating might mean owing back some of the credit at tax time. However, the ACA limits how much you’d have to repay if your estimate is off, especially if your income remains below certain thresholds. To avoid surprises, consider opting to receive the credit as a lump sum at year’s end if your income varies.

What if I Need to Prove My Income?

The government may ask you to verify your income if it’s lower than expected. Freelancers can submit:

• 1040 SE with Schedule C, F, or SE (for self-employment income)
• 1065 Schedule K1 with Schedule E
• Bank statements (personal or business)
• Tax returns
• Contracts, invoices, or bookkeeping records (including receipts for ALL allowable expenses)

If I Don’t Qualify for a Subsidy?

Even if you don’t qualify for a subsidy, affordable health insurance options are still available. Freelancers Union partners with insurers to provide plans designed for the independent workforce. When you purchase through us, a portion of your premium helps support advocacy for better policies and protections for freelancers at no extra cost to you.