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. For example, the self-employed health insurance deduction allows independent contractors and other self-employed individuals to deduct the health insurance premiums they pay. 

This is one deduction you don’t want to miss on your taxes. If you’re a self-employed person, you may deduct up to 100% of the health insurance premiums you paid during the year. To take the deduction, you must meet certain criteria.  We’ll go over those rules in this post and explain how you can deduct them on your return.

Do you need more help with self-employed health insurance and how it affects your taxes?  Check out our Guide to Gig Worker Taxes.

Are health insurance premiums tax deductible?

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

Note 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 coverage can you include in your self-employed health insurance deduction? You can include premiums paid for yourself, your spouse, dependents and any nondependent child under age 27 at the end of the year.

Who is not eligible for the self-employed health insurance deduction?

If you’re have access to participate in an employer-sponsored subsidized health plan, you won’t be eligible for this 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

You can 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.

Getting help with claiming the self-employed health insurance deduction

We know taxes for independent contractors can be tricky. But we’re on your side, you can feel confident filing your taxes.

Have a side business?  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 Online Premium (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.