Self-Employed Health Insurance Deduction: How It Works

If you’re self-employed, you may be wondering if you can deduct health insurance premiums from your tax return. Well, there’s good news – depending on your insurance and work status, you may be able to deduct up to 100% of the cost of health insurance premiums you pay throughout the year. Keep reading to learn if you’re eligible and how to do it. 

Am I considered self-employed? 

The easiest way to determine if you’re self-employed is whether or not you receive Form 1099-NEC for your work. Some companies that send out 1099s to their employees include: 

  • DoorDash  
  • Uber  
  • Etsy 
  • Employers who hire on a contract basis 
  • Multi-level marketing companies like AdvoCare, Scentsy, and more 

There are more factors that can help determine if you’re self-employed. For more information, read Are You Self-Employed? Here’s How to Tell. 

Deducting health insurance premiums for business owners 

Suppose you’re a business owner and pay health insurance premiums for your employees. In that case, you can deduct this expense when reporting your business’ income on Schedule C under Employee Benefit Programs (line 14).  

I’m self-employed. Is my health insurance premium deductible? 

Health insurance premiums are tax deductible if you have qualifying insurance. Check with your insurance provider to confirm your eligibility. Once you’ve verified your info, you can deduct the following premiums. 

  • Medical insurance premiums 
  • Dental and vision insurance premiums 
  • Qualified long-term care insurance (with limitations) 
  • Medicare premiums  

To claim this deduction, you must meet one of the following criteria: 

  • You’re reporting a net profit for the year using Schedule C or Schedule F. 
  • You’re also eligible if you’re a general partner or a limited partner receiving guaranteed payments 
  • You’re a shareholder owning more than 2% of an S corporation with wages from the corporation reported on Form W-2. 

Check out the additional qualifications to claim the Self-Employed Health Insurance Tax Deduction here

Can I deduct coverage for my family as well? 

You can deduct premiums for yourself, your spouse, qualifying dependents, or any nondependents on your insurance plan, as long as they are under age 26 at the end of the year. 

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

You wouldn’t be eligible for this deduction if you and your spouse participated in an employer-sponsored subsidized health plan within the year. This prevents a person enrolled under an employer’s plan from double dipping in the health insurance pool. 

What if I only had coverage for part of the year? 

If you’re recently self-employed, you can deduct your health insurance for the portion of the year when you weren’t enrolled in an employer-sponsored health plan. It should be noted that eligibility is determined on a month-to-month basis.  

Self-employed health insurance deduction limits 

The amount you can deduct is subject to your business’ net profits. For example, if your business’ net earnings exceed the total amount you paid for health coverage throughout the year, you can deduct the full amount of your health coverage on your tax return. But if your business made less than your health insurance costs, you can only deduct an amount equal to your business’ earnings. 

If your circumstances are like the latter example, you can deduct up to 7.5% of the remaining out-of-pocket health expenses if you itemize your deductions using Schedule A. Read Tax Deductions for Medical and Dental Expenses to learn more. 

The rules above apply to medical, dental, and vision insurance premiums. However, there are deduction limitations for long-term care insurance premiums. Check out the limits below: 

Age Range Deduction limit for 2023 
Under 40 $450 
Ages 41-50  $850 
Ages 51-60 $1,690 
Ages 61-70 $4,510 
Over 70 $5,640 

How to deduct health insurance premiums as a self-employed worker 

You can claim the self-employed health insurance deduction as an adjustment to your gross income on Schedule 1. You can take advantage of this deduction regardless of whether you claim the standard deduction or choose to itemize deductions.  

Need a little help filing taxes as a self-employed worker? TaxSlayer has all the forms and resources for your unique situation. Start today! 

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