Health insurance deduction for the self-employed

Health insurance is one of the largest costs for the self-employed, and this deduction can take a meaningful amount off the income tax bill. Its conditions are specific, though. This guide explains who qualifies and how to claim it.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. Checked against official sources on . 1 minute read.

Short answer

The self-employed health insurance deduction lets sole proprietors, partners and S corporation owners of more than 2% deduct medical, dental and qualifying long-term care premiums for themselves, their spouse and dependents, including children under 27. It reduces income tax, not self-employment tax, cannot exceed the business's earned income, and is not allowed for months when you could join a subsidized employer plan, including a spouse's.

At a glance

Who
Sole proprietors, partners, over-2% S corp owners
Covers
Medical, dental, qualifying long-term care, Medicare premiums
For
You, your spouse, dependents, children under 27
Limit
Earned income from the business
Not allowed
Months with access to a subsidized employer plan
Form
Form 7206, then Schedule 1
Health insurance deduction for the self-employedSteps: 1. Month by month eligibility; 2. Earned income limit; 3. Claim on Form 7206; 4. Rest as an itemized deduction.THE PROCESS AT A GLANCEHealth insurance deduction for the self-employed1Month by montheligibilityNo deduction for months youor your spouse could join asubsidized employer plan2Earned income limitThe deduction cannot exceednet profit from the businessunder which the plan isestablished, less certainretirement contributions3Claim on Form 7206Then carry the result toSchedule 1 of Form 10404Rest as an itemizeddeductionAny excess may be deductibleas a medical expense if youitemizeChecked against official sourcesTax BakersHealth insurance deduction for the self-employedSteps: 1. Month by month eligibility; 2. Earned income limit; 3. Claim on Form 7206; 4. Rest as an itemized deduction.THE PROCESS AT A GLANCEHealth insurance deduction for theself-employed1Month by month eligibilityNo deduction for months you or your spousecould join a subsidized employer plan2Earned income limitThe deduction cannot exceed net profit fromthe business under which the plan isestablished3Claim on Form 7206Then carry the result to Schedule 1 of Form10404Rest as an itemized deductionAny excess may be deductible as a medicalexpense if you itemizeChecked against official sourcesTax Bakers
The process at a glance: 1. Month by month eligibility; 2. Earned income limit; 3. Claim on Form 7206; 4. Rest as an itemized deduction.

Who qualifies?

Self-employed people with a net profit, partners with self-employment income, and shareholders owning more than 2% of an S corporation, whose premiums the corporation pays or reimburses and includes in their W-2 wages. The insurance plan must be established under the business, which includes a policy in the owner's own name for sole proprietors. See S corp owner payroll.

Which premiums count?

  • Medical and dental insurance premiums.
  • Medicare premiums, including Parts B and D.
  • Qualified long-term care premiums, up to age-based limits.
  • Premiums for a spouse, dependents and children under 27 at year end, even if not dependents.

Premiums paid with the premium tax credit need an adjustment, as only the part you paid yourself is deductible.

What limits apply?

  1. Month by month eligibility

    No deduction for months you or your spouse could join a subsidized employer plan.

  2. Earned income limit

    The deduction cannot exceed net profit from the business under which the plan is established, less certain retirement contributions.

  3. Claim on Form 7206

    Then carry the result to Schedule 1 of Form 1040.

  4. Rest as an itemized deduction

    Any excess may be deductible as a medical expense if you itemize.

Does it reduce self-employment tax?

No. It reduces adjusted gross income, so income tax falls, but self-employment tax is still calculated on the full net profit. See self-employment tax.

What does an example look like?

A freelance designer with $70,000 of net profit pays $9,600 a year in premiums for herself and her son, and has no access to an employer plan. She deducts $9,600 on Schedule 1, reducing her income tax. Her self-employment tax is unchanged.

Paying your own health insurance?

We check eligibility month by month, claim the deduction on Form 7206, and set up S corporation premiums correctly through payroll.

Book a call Chat on WhatsApp

Questions people ask

Can self-employed people deduct health insurance?

Yes. Sole proprietors, partners and over-2% S corporation owners can deduct premiums for themselves and their families.

Does the self-employed health insurance deduction reduce self-employment tax?

No. It reduces income tax only.

Can I deduct health insurance if my spouse has an employer plan?

Not for months when you could have joined your spouse's subsidized employer plan.

Which form is used to claim it?

Form 7206, with the result carried to Schedule 1 of Form 1040.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IRS: About Form 7206, Self-Employed Health Insurance Deduction
  2. IRS Publication 535: Business Expenses
  3. IRS: S corporation compensation and medical insurance issues

Rules and fees change. If you are reading this long after October 1, 2026, confirm the figures with the source before you rely on them.

Freelancers and self-employedSelf-employment tax explainedPayroll and contractorsS corp owner payroll: how to put yourself on payrollBusiness tax by entity typeBusiness expenses you can deduct: a working list

More in Freelancers and self-employed

Previous in this topicTaxes for freelancers on Upwork and FiverrNext in this topicSEP IRA vs Solo 401(k) for the self-employedTopicAll 18 guides in Freelancers and self-employed

This guide is general information. It is not tax or legal advice for your situation.