As a self-employed individual, you can deduct the premiums you pay for health insurance for yourself, your spouse, and your dependents using Form 7206, which helps determine the amount of your self-employed health insurance deduction. This deduction is reported on Schedule 1 (Form 1040), line 17. You must enter the smaller of the amount from Form 7206, line 3, or line 13 (your net earnings from self-employment) on this line.
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 covers your child under age 27 at the end of the tax year, even if not a dependent.
- Business Connection: The insurance plan must be established under your business. For sole proprietors (Schedule C or F), the policy can be in your name or the business name. For partners or S corporation shareholders, specific rules apply regarding how premiums are paid and reported (e.g., guaranteed payments on Schedule K-1 or wages on Form W-2).
- When to Use Form 7206: You must use Form 7206 if you have more than one source of self-employment income, file Form 2555 (for foreign earned income), or are using qualified long-term care insurance premiums to figure the deduction.
- Effect on Self-Employment Tax: You cannot subtract the health insurance deduction when calculating net earnings for self-employment tax. The deduction is taken after computing 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 SE (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.