As a self-employed individual, you can deduct the premiums you pay for health insurance for yourself, your spouse, and your dependents using the Self-Employed Health Insurance Deduction Worksheet or Form 7206, which is used to determine the allowable deduction. This deduction is reported on Schedule 1 (Form 1040), line 17. The amount you can deduct is generally limited to your earned income from the trade or business under which the insurance plan is established, as figured on Form 7206 or the worksheet.
Key Details for Claiming the Deduction
- Eligible Coverage: The deduction includes premiums for medical, dental, vision, and qualified long-term care insurance for yourself, your spouse, and dependents. It also includes coverage for your child under age 27 at the end of the tax year, even if the child is not your dependent.
- Business Connection: The insurance plan must be established under your trade or business. For sole proprietors (Schedule C or F), the policy may be in your name or the business name. For partners and S corporation shareholders, special rules apply to how premiums are paid and reported (for example, guaranteed payments on Schedule K-1 or wages on Form W-2).
- When to Use Form 7206: Form 7206 is generally required to figure the deduction, especially if you have more than one source of self-employment income, are claiming qualified long-term care premiums, or file Form 2555 (foreign earned income). In simpler situations, the worksheet in the Form 1040 instructions may be used.
- Effect on Self-Employment Tax: The health insurance deduction does not reduce net earnings for self-employment tax. It is taken as an adjustment to income after calculating self-employment tax on Schedule SE (Form 1040).
Important Notes
- Do not include this deduction when calculating medical expense deductions on Schedule A (Form 1040).
- Medicare premiums paid voluntarily to obtain insurance similar to private health insurance can be included in the deduction.
- Amounts paid from nontaxable retirement plan distributions (e.g., for retired public safety officers) cannot be used for this deduction.
Source:
Form 7206 Instructions (2025)
Schedule 1 (Form 1040) Instructions
Disclaimer: Always verify details with the current year’s Federal or State Department of Revenue Forms and Instructions. For complex situations, consult a CPA or tax attorney.