Self-Employed Health Insurance Deduction

I'm licensed as a health insurance broker, but I don't prepare taxes. Here, I explain the published IRS rules for tax year 2025 based on the most recent Form 7206 instructions. Since rules and dollar limits can change, check the current form for your filing year and ask your CPA to confirm your return's numbers.

Who can claim it

The deduction is generally available when you meet all these conditions for the year:

Your own business produced a net profit, reported on Schedule C or Schedule F, or as a partner's net earnings on Schedule K-1, box 14, code A. Using one of the optional methods for calculating self-employment tax can also make you eligible for the deduction.
An S corporation where you held more-than-2% shareholder ownership paid you wages, with your premiums included as wages on Form W-2.
That business must have the plan established under it. A sole proprietor's policy may use either their own name or the business's name.
For that month, no subsidized employer plan was available to you. Eligibility is reviewed each month, as described below.

How the monthly eligibility rule works

Eligibility is determined separately for each month. Any month when you could have joined a subsidized employer health plan is excluded from the deduction, even if you didn't enroll. That includes coverage available through your own employer or your spouse's, as well as the employer of a dependent or a child under 27.

Working for yourself during any portion of a month makes it a self-employed month. In the IRS example, self-employment lasting from September 15 through December 31 allows a deduction for premiums from only the final four months. The premiums paid for January through August aren't eligible for this deduction.

Which premiums you can deduct

Eligible premiums include medical, dental and vision coverage and qualified long-term care insurance. Coverage may be for yourself, your spouse or your dependents. It may also be for your child who was under 27 at year-end, whether they're a dependent or not. Children include a son, daughter, stepchild, adopted child or foster child.

An age-based limit applies to long-term care premiums. You can count the amount paid or that limit, whichever is lower. For tax year 2025, use your age at year-end to find the applicable cap:

480 dollars for age 40 or younger
900 dollars for age 41 to 50
1,800 dollars for age 51 to 60
4,810 dollars for age 61 to 70
6,020 dollars for age 71 or older

You can also count voluntarily paid Medicare premiums when the coverage is similar to private health insurance.

Limits that apply

Your net profit sets the maximum. Under Form 7206, you deduct the lower of your premiums or the adjusted net profit of the business with the plan. The main adjustments subtract the deductible share of self-employment tax and contributions to a SEP or qualified retirement plan tied to that same business.
Self-employment tax still uses income before this deduction. When you calculate the net earnings subject to self-employment tax, you can't subtract this amount.
You claim it outside your itemized deductions. Premiums deducted here can't also count as medical expenses on Schedule A. If you itemize, the portion you haven't deducted here can be included on Schedule A.
Premiums for S corporation owners go through payroll. The corporation reports premiums it pays as wages on your Form W-2. When you pay the premiums yourself, it must reimburse you and include that amount in W-2 wages. Your Medicare wages from that corporation are the figure used for this limit.
Use a separate form for each business. When you own multiple businesses with separate plans, each business needs its own Form 7206.

How a premium tax credit affects it

With Marketplace coverage and a premium tax credit, calculating the deduction changes the credit, and calculating the credit changes the deduction. Publication 974 explains the IRS approach. You may use its iterative method, repeating calculations until the numbers stop changing by less than one dollar, or its simplified method. Either way, your combined deduction and credit can't exceed the premiums you paid.

Advance credit payments must be reconciled on Form 8962 if you received them. Your CPA takes care of that with your return.

The HSA deduction stands on its own

A health savings account (HSA) has rules of its own. Contributions are deductible whether you itemize or not, and they're reported separately from your premium deduction. You must have high-deductible health plan coverage on the month's first day to contribute. For 2026, you can contribute up to 4,400 dollars for self-only coverage and 8,750 dollars for family coverage. You must stop contributing starting with the first month you're enrolled in Medicare.

Ask your CPA to calculate both deductions separately: your health premiums on Form 7206 and your HSA contributions on Form 8889.

The sources for these rules

You'll now find the deduction worksheet in Form 7206. It previously appeared in Publication 535, which the IRS has discontinued.

Speak with Sam, then have your CPA calculate your figures.

Share your plan and the months you had coverage with me. I'll check how they fit what you're trying to accomplish. Your CPA should then calculate your figures, since the rest of your return affects the deduction. If your CPA needs the plan information, the referral page describes how we can work together.

Self-employed? Can you deduct what you pay for health insurance?