Self-Employed Health Insurance Deduction
Premiums you pay for yourself and your family come off your income above the line. Check how much you can claim and what it is worth.
| Premiums paid | $7,200 |
| Profit limitProfit − ½ SE tax − retirement | $51,114 |
| Deduction | $7,200 |
How the deduction works
Employees get health insurance paid with pre-tax dollars through their employer. This deduction gives freelancers a similar break: premiums reduce adjusted gross income directly, whether or not you itemize. It also shrinks your QBI slightly, since qualified business income is reduced by the deduction. Rules: IRS Form 7206 and its instructions.
Questions freelancers ask
Who can take the self-employed health insurance deduction?
Sole proprietors, single-member LLC owners, partners and more-than-2% S-corporation shareholders with a net profit, who pay medical, dental, vision or qualified long-term care premiums for themselves, a spouse, dependents or children under 27. You cannot take it for any month you were eligible for a subsidised plan through your own or your spouse's employer.
Is the self-employed health insurance deduction limited?
Yes. It cannot exceed your net profit from the business minus the deductible half of self-employment tax and any SEP, SIMPLE or solo 401(k) contributions for yourself. Premiums above that limit can go on Schedule A as a medical expense instead.
Does it reduce self-employment tax?
No. It is an adjustment to income on Schedule 1, line 17, so it lowers income tax only. Self-employment tax is still computed on full net profit.
Can I deduct Medicare premiums?
Yes. Medicare Part A (if you pay it), Part B, Part D and Medicare Advantage premiums qualify when you are self-employed, including premiums for your spouse.
What about ACA marketplace plans with a premium tax credit?
You can deduct only the part of the premium you actually pay after the credit. Because the credit and deduction affect each other, IRS Publication 974 has an iterative worksheet; tax software handles it.