The Self-Employed Health Insurance Tax Deduction, Explained

This is general information, not tax advice. Your accountant knows your situation and this article does not.

What the deduction is

If you are self-employed and pay your own health insurance premiums, you can generally deduct them from your gross income. It is an above-the-line deduction, meaning you take it whether or not you itemise, and it reduces your adjusted gross income directly.

Who can take it

Broadly, people with net self-employment profit: sole proprietors, partners, and more-than-2% S-corporation shareholders, with different mechanics for each. You generally cannot take it for any month you were eligible for an employer-subsidised plan through your own job or a spouse's.

What counts

Medical, dental, and qualifying long-term care premiums for you, your spouse and your dependants. Note that a dental and vision add-on is usually a premium and may qualify; a discount programme is generally not insurance and generally does not. Ask your accountant which of your line items are which.

The limit people trip over

The deduction cannot exceed your net self-employment income. If the business had a thin year, the deduction is capped at what you actually earned, and it does not create or increase a loss.

Keep the paperwork

Save your monthly premium receipts and your year-end statement. If your plan is billed monthly by card, download the statements rather than relying on being able to retrieve them later.