Self-Employed Health Insurance — United States Tax Rules

Deduct 100% of health, dental, and vision insurance premiums for yourself, spouse, and dependents on Schedule 1 Line 17 — NOT on Schedule C.

Claimable: Fully claimable · Tax authority: IRS (Internal Revenue Service)

IRS (Internal Revenue Service) Rules

• Self-employed health insurance premiums are deducted on Form 1040 Schedule 1 Line 17 as an above-the-line deduction — NOT on Schedule C.
• Deductible: premiums for health, dental, and vision insurance for yourself, your spouse, and your dependents.
• The deduction cannot exceed your net self-employment income for the year — the deduction is limited to the net income from the business that generates the insurance eligibility.
• NOT deductible if: you were eligible to participate in an employer-subsidized health plan through your own job or your spouse's job for any month of the year. For those months, the premium is not deductible as a self-employed health insurance deduction.
• The premium deduction reduces your federal and state income tax but does NOT reduce your self-employment tax base — SE Tax is calculated before this deduction.
• If you set up an S Corporation, health insurance premiums can be included in W-2 wages and deducted through a different mechanism — consult a CPA.
• Long-term care insurance premiums are also potentially deductible — age-based limits apply.

Limits

100% of premiums deductible, limited to net self-employment income. Cannot claim if eligible for employer-sponsored coverage any month of the year.

Worked Example

Robert, a freelance engineer, pays $11,400/year in health insurance premiums for himself and his spouse. His net Schedule C income is $95,000. He deducts the full $11,400 on Schedule 1 Line 17. This reduces his AGI by $11,400, saving him approximately $2,508 in federal income tax at the 22% bracket.

Record Keeping

• Keep all health, dental, and vision insurance premium payment receipts and insurer statements
• Note the months you were eligible for employer-sponsored coverage (if any) — exclude those months' premiums from the deduction
• Retain the insurance policy showing coverage for yourself, spouse, and dependents

Frequently Asked Questions

Does self-employed health insurance reduce my self-employment tax?

No — self-employed health insurance is an income tax deduction (Schedule 1), not a Schedule C deduction. It reduces your federal income tax but does not reduce your net Schedule C profit, which is the basis for SE Tax calculations.

Can I deduct health insurance for my employees on Schedule C?

Yes — health insurance premiums paid for employees (not the owner-employee) are deductible on Schedule C Line 14 (Employee Benefit Programs). This is different from the self-employed health insurance deduction for the owner's personal coverage.