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health insurance

TL;DR

Health insurance premiums can generally be deducted by self-employed individuals as an adjustment to income, but there are specific conditions and limitations that apply.

Detailed Answer

Self-employed individuals may deduct health insurance premiums for themselves, their spouses, dependents, and children under age 27 as an 'above-the-line' deduction on their tax return, reducing their adjusted gross income. This deduction is available if the taxpayer is not eligible to participate in a subsidized health plan maintained by any employer of the taxpayer or their spouse. The deduction is limited to the net profit from the business, meaning you cannot deduct more than your business income. Additionally, premiums paid for long-term care insurance are subject to age-based limits. Employees may deduct health insurance premiums as an itemized deduction on Schedule A, subject to the 7.5% of AGI floor for medical expenses.

Where to Put It on the Tax Form

Form 1040, Schedule 1, Line 17 for self-employed health insurance deduction. For itemized deductions, use Schedule A, Line 1.

Real World Example

A freelance graphic designer earns $50,000 in net income from their business and pays $5,000 in health insurance premiums for themselves and their family. They can deduct the full $5,000 as an adjustment to income on Schedule 1, Line 17, provided they are not eligible for any employer-subsidized health plan.

Audit Risk & Documentation Tips

Moderate audit risk. Keep detailed records of premium payments, including invoices and bank statements. Ensure documentation shows that the taxpayer is not eligible for an employer-subsidized plan. Retain copies of the insurance policy and proof of payment for at least three years.

IRS Reference

IRS Publication 535, Business Expenses; IRS Publication 502, Medical and Dental Expenses.

Relevant Industries

FreelancersConsultantsSmall Business OwnersIndependent Contractors

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on January 4, 2026

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