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Deducting Health Insurance Premiums If You're Self-Employed

Updated for Tax Year 2022 • December 1, 2022 08:13 AM


OVERVIEW

Most self-employed taxpayers can deduct health insurance premiums, including age-based premiums for long-term care coverage. Write-offs are available whether or not you itemize, if you meet the requirements.


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Deducting health insurance premiums

If you are self-employed, you may be eligible to deduct premiums that you pay for medical, dental and qualifying long-term care insurance coverage for yourself, your spouse and your dependents.

  • This health insurance write-off is entered on Part II of Schedule 1 as an adjustment to income and transferred to page 1 of Form 1040, which means you benefit whether or not you itemize your deductions.
  • Unlike an itemized deduction, this deduction treatment is beneficial because it lowers your adjusted gross income (AGI).
  • Having lower AGI can reduce the odds that you’ll be affected by unfavorable phase-out rules that can cut back or eliminate various tax breaks.

Eligibility is determined month-by-month

You can only claim the health insurance premiums write-off for months when neither you nor your spouse were eligible to participate in an employer-subsidized health plan.

For example, if you were single and ineligible for any employer-provided health plan during the last six months of the year because you left your job and started your own business, you can claim the deduction for premiums you paid for coverage during that six-month period.

Earned income limitation

The deduction cannot exceed the earned income you collect from your business.

For example, if your self-employment activity is a sole proprietorship that generated a tax loss for the year, you’re not allowed to claim the deduction because the business didn't generate any positive earned income.

Partners and LLC members

Partners and LLC members who are treated as partners for tax purposes are considered to be self-employed.

  • If you fit into this category and directly pay your own health insurance premiums, you can claim the page 1 deduction.
  • If the partnership or LLC pays the premiums, special tax reporting rules apply to the partnership’s or LLC’s return, but you can still claim the deduction for premiums paid for your coverage.

Premiums paid to cover your employees

If your business has employees and you pay health insurance premiums for them, these amounts are deducted on the applicable tax form and line for employee benefit program expenses.

For example, if your business is a sole proprietorship, you deduct premiums paid to provide health coverage to employees on Schedule C.

Limited deductions for long-term care insurance premiums

Here's what you can deduct this year for long-term care insurance premiums.

2022
Age 40 and younger
$450
Age 41 to 50
$850
Age 51 to 60
$1,690
Age 61 to 70
$4,520
Over age 70
$5,640

 

The bottom line

If you qualify, the deduction for self-employed health insurance premiums is a valuable tax break. With the rising cost of health insurance, a tax deduction can help you pay at least a portion of the premium cost. And that will help to keep you healthy—and happy—in 2022 and beyond.

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