Self-Employed Health Insurance Deduction

In a nutshell, this deduction allows self-employed folks (sole proprietors, partners, and S-Corporation shareholders) to deduct up to 100% of health, dental, and long term care insurance premiums for themselves, spouses, and dependents. The deduction is limited to profitability, therefore the deduction can never exceed the profit from self-employed activity.

Main requirements:

  • You weren’t eligible for another health plan (no access to any group health insurance plans)

  • You have a profit from self employed income sources

For sole proprietors (schedule C or schedule F) the deduction is simple, and the health insurance policy can be an individual plan.

For an S-Corporation shareholder, an individual health insurance policy can be deducted but has to be paid for by the S-Corporation and reported on your W2. However, if you have eligible employees that you discriminate against (do not offer health insurance), your premiums can be subject to social security and medicare tax. This does not apply to employees that are part-time, seasonal, or have not completed three years of service.

Every scenario is different, therefore this general advice cannot be applied directly to your situation and is not intended to be tax advice. If you have concerns about the self employed health insurance deduction, it is best practice to consult with a tax professional.