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Deducting Health Insurance Premiums If You're Self-Employed

Updated for Tax Year 2019


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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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 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.

Keep in mind that this deduction treatment also means you can’t deduct the premiums when you calculate your self-employment tax liability.

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 line 14 of Schedule C.

Limited deductions for long-term care insurance premiums

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

 

2019

 

Age 40 and younger

 

$420

 

Age 41 to 50

 

$790

 

Age 51 to 60

 

$1,580

 

Age 61 to 70

 

$4,220

 

Over age 70

 

$5,270

 

 

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 2019 and beyond.

If you’re self-employed, TurboTax Home & Business offers step-by-step guidance for handling all of your personal and business deductions.

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