The Self-Employed Health Insurance Deduction allows eligible taxpayers to deduct health insurance premiums paid for themselves, their spouse, dependents, and certain adult children. The good news is that you don't need to own a particular type of business to qualify.
In general, any self-employed individual may qualify for the deduction as long as they meet the health insurance coverage requirements and satisfy at least one of the business-income requirements listed below.
Who Qualifies?
To claim the Self-Employed Health Insurance Deduction, at least one of the following statements must apply to you during the tax year:
Schedule C or Schedule F Filers
You may qualify if:
- You were self-employed and reported a net profit on Schedule C (Profit or Loss From Business), or
- You reported a net profit on Schedule F (Profit or Loss From Farming).
This includes many sole proprietors, independent contractors, gig workers, freelancers, and farmers.
Partners in a Partnership
You may qualify if:
- You were a partner in a partnership, and
- You had net earnings from self-employment reported on Schedule K-1 (Form 1065), Box 14, Code A.
Taxpayers Using an Optional Method
You may qualify if:
- You used one of the IRS optional methods to calculate your net earnings from self-employment on Schedule SE (Form 1040).
The optional methods can help certain taxpayers qualify for Social Security coverage and other tax benefits even when their actual self-employment income is low.
More-Than-2% S Corporation Shareholders
You may qualify if:
- You owned more than 2% of an S corporation, and
- You received wages from that S corporation during the year.
For S corporation shareholders, health insurance premiums paid or reimbursed by the corporation are generally included as wages on Form W-2 and may qualify for the deduction when properly reported.
Important Things to Know
Even if you meet one of the business requirements above, you must also meet the IRS rules regarding health insurance coverage.
In addition:
- The deduction is generally limited to the amount of earned income from the business that established the insurance plan.
- You generally can't claim the deduction for any month you were eligible to participate in an employer-sponsored health plan through your own employer or your spouse's employer.
- The deduction is claimed as an adjustment to income, which means you can receive the benefit even if you don't itemize deductions.