In one sentence: if you have a net profit from self-employment, you can usually deduct the medical, dental, vision and qualifying long-term-care premiums you pay for yourself, your spouse, your dependents and children under 27, as an adjustment to income on your tax return.
Who qualifies
- Sole proprietors and single-member LLCs (Schedule C), including owner-operators and 1099 contractors
- Partners in a partnership, with some special rules
- More-than-2% shareholders in an S corporation, if the premiums are handled through the company correctly
The two rules that trip people up
1. You need a net profit
The deduction can't be more than your net earnings from the business. A year with a loss means no deduction.
2. No deduction for months you could have joined an employer plan
If you, or your spouse through their job, were eligible for an employer-subsidized health plan, you can't take the deduction for those months, even if you didn't enroll. This is checked month by month.
What counts
| Usually counts | Usually doesn't |
|---|---|
| Medical insurance premiums (Marketplace or private) | Premiums paid with pre-tax money or covered by a tax credit |
| Dental and vision premiums | Deductibles, copays and out-of-pocket costs |
| Medicare premiums | Health sharing ministry contributions, in most cases |
| Qualifying long-term-care premiums, up to age-based limits | Months you were eligible for an employer-subsidized plan |
How it interacts with ACA subsidies
If you get a Marketplace premium tax credit, you can only deduct the part of the premium you actually paid. Because the deduction lowers your income, which can increase your credit, which changes the deduction, the IRS has a specific calculation for this. Tax software handles it, but it's worth having a tax professional review it if your income is near the 400% subsidy cliff.
Above the line means everyone can use it
This isn't an itemized deduction. It's an adjustment to income, so you get it even if you take the standard deduction. It reduces federal income tax, but not self-employment tax.
Other tax tools for the self-employed
- HSA contributions with an HSA-eligible plan
- SEP-IRA or Solo 401(k) contributions, which also lower your MAGI for subsidy purposes
- Hiring a spouse through a properly set up plan, in some situations. Talk to a CPA.
Frequently asked questions
Can 1099 workers deduct health insurance?
Generally yes, with a net profit and no eligibility for an employer-subsidized plan for those months.
Is it an itemized deduction?
No. It's an above-the-line adjustment, available with the standard deduction.
Self-employed and shopping for coverage?
We'll compare Marketplace, off-exchange and private options for your situation, at no cost to you.
Get a QuoteGeneral information only, not tax advice. Tax rules are complex and change. Talk to a qualified tax professional before claiming any deduction.