Self-Employed Health Insurance Deduction

What Is This Deduction?

The self-employed health insurance deduction lets freelancers, independent contractors, and business owners deduct the cost of health, dental, and vision insurance premiums from their taxable income.

Unlike most deductions, this one is "above-the-line," meaning it reduces your Adjusted Gross Income (AGI). This can help you qualify for other tax benefits that have AGI-based limits.

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Who Qualifies?

You can take this deduction if you meet ALL of these requirements:

1. You Have Self-Employment Income

You must have net profit from self-employment. This includes:

• Sole proprietors (Schedule C income)
• Partners in a partnership
• LLC members
• S-corp shareholders who own more than 2%
• Gig workers and freelancers

2. You're Not Eligible for Employer Coverage

This is the key rule many people miss. You cannot take this deduction for any month in which you were eligible to participate in:

• An employer's health plan (from your own job)
• Your spouse's employer health plan
• Your parent's plan (if you're under 27)

3. The Plan Is in Your Name (or Your Business's Name)

The insurance policy must be established under your name, your business name, or your spouse's name if you're covered under their self-employed policy.

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What Can You Deduct?

You can deduct premiums for:

• Medical insurance — including marketplace (ACA) plans
• Dental insurance
• Vision insurance
• Long-term care insurance — subject to age-based limits
• Medicare premiums — Parts A, B, C, and D (if you're self-employed and have SE income)

You can deduct premiums for coverage of:

• Yourself
• Your spouse
• Your dependents
• Children under age 27 (even if not your dependent)

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Deduction Limits

There are two important limits:

1. Can't Exceed Your Net SE Profit

Your deduction cannot be more than your net self-employment income for the year. If your premiums are $12,000 but your net SE income is only $10,000, you can only deduct $10,000.

2. Month-by-Month Eligibility

The deduction is calculated month by month. If you became eligible for your spouse's employer plan in July, you can only deduct premiums for January through June.

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How It Affects Your Taxes

Key tax impacts:

• Reduces your federal income tax
• Reduces your state income tax (in most states)
• Lowers your AGI, potentially helping you qualify for other benefits
• Does NOT reduce self-employment tax (unlike the deductible half of SE tax)

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This Deduction vs. Itemized Medical Expenses

You have two potential ways to deduct health insurance:

The SE health insurance deduction is almost always better because:

• You get it even if you take the standard deduction
• There's no 7.5% AGI floor
• It reduces AGI (helping other tax benefits)

Note: You can't deduct the same premiums twice. If you take the SE health insurance deduction, don't include those premiums in itemized medical expenses.

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How to Claim the Deduction

Report this deduction on Schedule 1 (Form 1040), Line 17. You don't need to itemize—it's claimed separately from Schedule A.

You'll need to:

• Calculate your net SE income (from Schedule C or Schedule K-1)
• Total your qualifying health insurance premiums
• Take the lesser of the two amounts
• Confirm you weren't eligible for employer coverage

Calculate Your SE Tax & Deductions →