If you are self-employed and pay for your own health insurance, you can generally deduct the premiums — but not on Schedule C, and not for every month. The self-employed health insurance deduction is an adjustment to income with two limits: it cannot exceed what your business earned, and it disappears for any month you could have joined a subsidized employer plan.
This guide covers US federal rules for the 2025 tax year, the return most people file in 2026. It walks through who qualifies, what counts, where the number goes, and the month-by-month rule that catches the most people.
What the self-employed health insurance deduction is
The self-employed health insurance deduction lets a self-employed person with a net profit deduct medical, dental, vision and qualified long-term care insurance premiums as an adjustment to income, rather than as a business expense. The rule is in Internal Revenue Code §162(l), and the calculation is on IRS Form 7206, whose instructions are the document to read if you want the exact wording.
Because it is an adjustment to income, you get it whether or not you itemize. That is the main reason it is worth more than treating the same premiums as a medical expense on Schedule A, where only the amount above a percentage of your income counts.
Who qualifies: the two tests
The Form 7206 instructions for 2025 list who can take the deduction: a self-employed person with a net profit on Schedule C or Schedule F, a partner with net earnings from self-employment, someone who used one of the optional methods on Schedule SE, or a more-than-2% shareholder who received wages from an S corporation. Then two tests decide how much.
Test 1 — the earned income limit. The deduction cannot be more than the earned income from the business the insurance plan is established under. Form 7206 starts from that business's net profit and subtracts the matching share of the deductible half of self-employment tax and any SEP, SIMPLE or qualified retirement plan contributions made for the same business. Your deduction is the smaller of the premiums you paid and that limit. A business with a loss gives you nothing to deduct against.
Test 2 — the subsidized plan months. You cannot take the deduction for any month you were eligible to take part in a subsidized health plan maintained by your employer or your spouse's employer — even if you did not enroll. The same applies to a plan offered by the employer of your dependent or of your child who was under 27 at the end of the year. The IRS applies this test separately to long-term care plans and to other health plans, so being eligible for one does not rule out the other.
Test 2 is the one people miss. A part-time W-2 job with a benefits package, or a spouse who becomes eligible for coverage mid-year, changes the answer for those months regardless of which plan you actually used.
Worked example: a spouse's plan starting in July
Maya is a freelance photographer with a net profit well above her premiums. She pays $500 a month for a private health policy all year and claims no premium tax credit. Her spouse starts a new job on July 1 and becomes eligible for that employer's subsidized family plan the same day. Maya keeps her own policy anyway.
| Months | Premium paid | Eligible for a subsidized employer plan? | Deductible? |
|---|---|---|---|
| January–June | $500 a month | No | Yes — $3,000 |
| July–December | $500 a month | Yes (spouse's subsidized plan) | No — $0 |
Maya paid $6,000 in premiums but can use only the $3,000 from January to June for the self-employed health insurance deduction. The July–December premiums are not lost entirely: the Form 7206 instructions say premiums you cannot deduct this way can be included as medical expenses on Schedule A if you itemize. Estimates — confirm with your tax professional.
What premiums count
- Medical, dental and vision insurance for you, your spouse and your dependents.
- Coverage for a child who was under 27 at the end of the year, even if that child is not your dependent.
- Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance.
- Qualified long-term care insurance, capped per person by age at the end of the year. For 2025, Form 7206 lists: 40 or younger, $480; 41–50, $900; 51–60, $1,800; 61–70, $4,810; 71 or older, $6,020. You use the smaller of the premium paid and the limit.
The plan also has to be established under your business. For a sole proprietor filing Schedule C or Schedule F, the Form 7206 instructions say the policy can be in the name of the business or in your own name, so an ordinary individual policy you pay for works.
Where it goes on your return
For the 2025 tax year the deduction goes on Schedule 1 (Form 1040), line 17, "Self-employed health insurance deduction." You figure it on Form 7206 (line 14 carries to Schedule 1, line 17), or on the simpler worksheet in the Form 1040 instructions when you qualify for it. The Form 7206 instructions say to use the form itself if you had more than one source of self-employment income, file Form 2555, or are including long-term care premiums.
Two things it does not do:
- It does not go on Schedule C. Health insurance for yourself is not Schedule C line 15 "Insurance" — that line is for business insurance such as liability or professional cover. Our guide to categorizing expenses for taxes keeps the two apart for the same reason.
- It does not reduce self-employment tax. The Form 7206 instructions say you cannot subtract it when figuring net earnings for self-employment tax. Your Schedule SE is worked out before this deduction — see our Schedule SE line-by-line guide for how that tax is calculated, or the self-employment tax calculator for an estimate.
Don't count the same premiums twice: the amount you deduct on Schedule 1 cannot also go on Schedule A as a medical expense.
Single-member LLCs, partners and S corporation owners
Single-member LLC. If the LLC is taxed as a sole proprietorship and reports on Schedule C, the rules are the same as for any sole proprietor: the policy can be in the LLC's name or yours.
Partners. A partner with net earnings from self-employment can qualify. The Form 7206 instructions say the partnership must pay or reimburse the premiums and report them to you on your Schedule K-1; otherwise the plan is not treated as established under the business.
More-than-2% S corporation shareholders. The S corporation pays or reimburses the premiums and reports them as wages in box 1 of your Form W-2. Under IRS Notice 2008-1, those amounts are wages for income tax withholding but are not subject to Social Security and Medicare tax when the exclusion requirements are met. Form 7206 (line 11) then bases your earned income limit on your Medicare wages from the S corporation (box 5 of the W-2), not the box 1 figure. If you are weighing the election, our post on S corp elections for creators covers the broader trade-offs.
If you get a marketplace premium tax credit
If your plan came through the Health Insurance Marketplace and you received advance premium tax credit payments or are claiming the credit, the deduction and the credit affect each other: the deduction lowers your income, and the credit depends on your income. IRS Publication 974 (2025) explains the calculation with a simplified method and an iterative method, and notes the simplified method may not always produce the most favorable result. Tax software normally runs this for you. If you prepare the return by hand, work through Publication 974 rather than estimating.
Keep the premium records
To claim the deduction you need the total premiums you paid, month by month, and a note of any month you or your spouse were eligible for an employer plan. Premium invoices, payment confirmations and marketplace statements usually arrive by email, which makes them easy to lose by the following spring.
ExpenseBot is an expense tracker that scans your Gmail for receipts and invoices and writes each one into a Google Sheet in your own Drive, so the premium payments that reached your inbox are in one place at year end. One caution about categories: keep these premiums in their own category, separate from business insurance, and leave them out of your Schedule C totals. Give that category a name without the word "insurance" — "Health premiums", for example — because a category named "Health insurance" can be read as ordinary business insurance when Schedule C totals are built. ExpenseBot does not decide for you that a premium belongs on Schedule 1 rather than Schedule C, and it does not prepare Form 7206.
If you are sorting out the rest of your year, our list of tax deductions freelancers commonly miss puts this one in context, and the freelancer expense tracker page shows how receipts get captured through the year. Canadian readers should read our guide to private health services plans and health spending accounts instead — this US rule does not apply in Canada.
Frequently Asked Questions
Can self-employed people deduct health insurance premiums?
Generally yes. If you are self-employed with a net profit, you can deduct medical, dental, vision and qualified long-term care premiums for yourself, your spouse, your dependents and a child under 27 as an adjustment to income on Schedule 1 (Form 1040), line 17 for 2025. The deduction cannot exceed the earned income from the business the plan is established under, and it is unavailable for any month you were eligible for a subsidized employer plan. Estimates — confirm with your tax professional.
Does the self-employed health insurance deduction go on Schedule C?
No. It is an adjustment to income on Schedule 1 (Form 1040), not a Schedule C business expense. That means it lowers your income tax but not your self-employment tax — the Form 7206 instructions say you cannot subtract it when figuring net earnings for self-employment tax.
Can I take the deduction if my spouse's employer offers coverage?
Not for any month you were eligible to take part in that subsidized plan, even if you did not enroll. The IRS applies this month by month, so you can still deduct premiums for the months before the eligibility started. The test is run separately for long-term care plans and for other health plans.
Are Medicare premiums included?
Yes. The Form 7206 instructions say Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction.
What if my business had a loss this year?
The deduction is limited to the earned income from the business the plan is established under, and the instructions require a net profit. A loss from that business generally means no self-employed health insurance deduction from it. Premiums you cannot deduct this way may still count as medical expenses on Schedule A if you itemize. Estimates — confirm with your tax professional.
I pay for my own insurance through the marketplace and get the premium tax credit. Can I still take this deduction?
Yes, but the two interact: the credit depends on your income and the deduction changes your income. IRS Publication 974 has the calculation, with a simplified method and an iterative method. Most tax software runs it for you; if you prepare the return by hand, work through Publication 974 rather than guessing.
I'm in Canada. Does this apply to me?
No. This is a US federal rule. Canadian business owners looking at health and dental coverage should read about private health services plans and health spending accounts instead.
This guide is educational and describes US federal rules for the 2025 tax year in general terms. Sources: IRC §162(l); IRS Instructions for Form 7206 (2025); Form 7206 (2025); Schedule 1 (Form 1040) (2025); IRS Publication 974 (2025); IRS Notice 2008-1. State rules differ and individual circumstances change the answer. Estimates — confirm with your tax professional.