Self-Employed Health Insurance Deduction: 2025 and 2026

• Dan O'Donnell
• February 24, 2025
• 6 min read

The self-employed health insurance deduction can reduce your federal taxable income even if you take the standard deduction. Eligibility depends on your business income, how the plan is established, and access to subsidized employer coverage. Use 2025 amounts for a 2025 return filed in 2026 and 2026 amounts for 2026 planning.

Who qualifies?

Eligible taxpayers can include sole proprietors with a net profit, partners with qualifying self-employment earnings, and shareholders owning more than 2% of an S corporation who receive qualifying wages. The insurance must be established under the business.

• Sole proprietors: A policy can be in your name or the business name.
• Partners: The partnership can pay premiums or reimburse premiums you paid, with appropriate income reporting.
• S corporation shareholders: The corporation generally must pay or reimburse premiums and include the amount in your Form W-2 wages. Paying a personal policy without corporate reimbursement generally does not establish the plan under the corporation.

No deduction is allowed for months when you were eligible for a health plan subsidized by your employer, your spouse’s employer, or the employer of your dependent or child under age 27. This applies even if you declined that coverage.

What premiums can you include?

Eligible coverage can include medical, dental, and qualified long-term care insurance for you, your spouse, dependents, and a child under age 27 at year end, whether or not that child is your dependent. Voluntarily paid Medicare premiums can qualify when the business-plan rules are met. Former-employer COBRA coverage requires separate consideration.

Qualified long-term care premiums are limited to actual premiums paid or the age-based annual cap, whichever is smaller.

Sources: 2025 Form 7206 instructions and IRS 2026 inflation adjustments.

How much is deductible?

Your deduction cannot exceed the available earned income from the business under which the plan is established. The calculation can require adjustments for the deductible portion of self-employment tax and retirement contributions. A business loss does not generate an unlimited personal health insurance deduction.

The deduction reduces income for income tax purposes, but does not reduce self-employment tax. Eligible premiums not used here may qualify under itemized medical expense rules, subject to the 7.5% AGI threshold.

Coordinate credits and other benefits

Do not deduct premiums reimbursed tax-free or already paid pretax. Marketplace premium tax credits interact with the deduction, sometimes requiring an iterative calculation under IRS Publication 974. Use the appropriate tax year’s rules: the enhanced Marketplace credit provisions for 2025 do not simply carry over to 2026.

How do you claim it?

Report the deduction on Schedule 1. Many 2025 filers can use the Form 1040 worksheet, but Form 7206 is required for certain situations, including multiple sources of income subject to self-employment tax, Form 2555, or qualified long-term care premiums. Follow our step-by-step claiming instructions and review common deduction mistakes before filing.