What is the self-employed health insurance deduction?

Being self-employed affects your taxes in several ways compared to workers who are considered employees. One big difference is in the deductions you can take to offset your taxable income. For example, the self-employed health insurance deduction allows independent contractors and other self-employed taxpayers to deduct the health insurance premiums they pay to help offset the cost of medical expenses.

This is one tax deduction you don’t want to miss. If you’re a self-employed individual, you may deduct up to 100% of the health insurance premiums you paid during the year on your income tax return. To take the deduction, you must meet certain Internal Revenue Service (IRS) criteria. We’ll go over those rules in this post and explain how you can deduct health insurance costs for tax purposes.

Do you need help with self-employment tax topics beyond self-employed health insurance? Check out our Guide to Gig Worker Taxes.

Are health insurance premiums tax deductible?

Yes, they are deductible if you have a qualifying insurance plan and if you’re an eligible self-employed individual. Eligible health insurance includes medical insurance, qualifying long-term care coverage, and all Medicare premiums (Parts A, B, C and D).

Are health insurance premiums deductible for prior tax years?

If you didn’t include Medicare premiums (or other insurance premiums) on a prior year’s return, you can file an amended return to claim or increase your deduction for self-employed health insurance for that year.

Who is eligible for the self-employed health insurance deduction?

Your health insurance premiums are tax deductible if you have a net profit reported on Schedule C or F. You are also eligible if you’re a general partner, a limited partner receiving guaranteed payments, or a shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2.

Whose health coverage can you include in your self-employed health insurance deduction?

You can include a health insurance premium paid for yourself, your spouse, dependents, and any nondependent child under age 27 at the end of the year.

Who isn’t eligible for the self-employed health insurance deduction?

If you have access to participate in an employer-sponsored subsidized health insurance plan, you won’t be eligible for this tax deduction. The employer in this case could be someone you or your spouse works for. If the plan is sponsored by either employer, it means your health insurance premiums aren’t tax deductible. (Note: A subsidized plan is one where the employer pays a portion of the premium.)

Generally, this prevents a person who is both an employee and self-employed from claiming the self-employed health insurance deduction.

What if you had access to an employer plan for part of the year?

This deduction is applied on a month-to-month basis, so, you would only be disqualified from claiming the deduction for the part of the year that you had employer plan coverage.

What if you didn’t have access to both health care and long-term health care coverage?

You can apply this rule separately to policies that include long-term health care coverage and those that do not.

How to deduct health insurance premiums for the self employed

People often ask, “Can you deduct health insurance premiums on Schedule C?” The answer is “no.” You claim the self-employed health insurance deduction as an adjustment to your gross income on Schedule 1 of Form 1040. You can claim this deduction regardless if you choose to claim the standard deduction or itemize your deductions.

Get help with claiming the self-employed health insurance deduction

We know taxes for independent contractors can be tricky and that there are many impacts self employment has on your taxable income. But we’re on your side, you can feel confident filing your taxes as you navigate self employed health insurance deductions and other tax breaks.

Have side income? Take control of your taxes and get every credit and deduction you deserve. File with H&R Block Online Deluxe (if you have no expenses) or H&R Block Self-Employed Online (if you have expenses).

Have questions about self-employment taxes and other small business tax issues? Rely on our team of small business certified tax pros to get your taxes right and keep your business on track. Find out how Block Advisors can help with your small business taxes.

Our small business tax professional certification is awarded by Block Advisors, a part of H&R Block, based upon successful completion of proprietary training. Our Block Advisors small business services are available at participating Block Advisors and H&R Block offices nationwide.