The Self-Employed Health Insurance Deduction: A Valuable Personal Deduction (2024)

FAQs

The Self-Employed Health Insurance Deduction: A Valuable Personal Deduction? ›

The deduction – found on Schedule A of your income tax return — covers a wide range of medical expenses, and also includes premiums you pay for health insurance (including Medicare) or qualified long-term care. And you can only deduct expenses in excess of 7.5% of your adjusted gross.

Are health insurance premiums tax deductible? Yes, they are deductible if you have qualifying insurance and if you're an eligible self-employed individual. Qualifying health insurance includes medical insurance, qualifying long-term care coverage and all Medicare premiums (Parts A, B, C and D).

Option E is the correct answer. This deduction allows self-employed individuals to deduct the cost of health insurance premiums paid for themselves, their spouses, and their dependents as an adjustment to their income. It is available even if the taxpayer has an overall business loss from self-employment.

On the Select the expense categories you have screen, select Less common to show all expense categories. Browse the options and select Health insurance premiums, then select Continue. On the Expenses section, find the Health insurance premiums section and select Start.

Your total qualified business income (QBI) may get a reduction for one-half self-employment (SE) tax, SE health insurance, or certain other retirement plan contributions.

Normally, you should only claim the medical expenses deduction if your itemized deductions are greater than your Standard Deduction (TurboTax can also do this calculation for you). If you elect to itemize, you must use IRS Form 1040 to file your taxes and attach Schedule A.

A tax credit you can use to lower your monthly insurance payment (called your “premium”) when you enroll in a plan through the Health Insurance Marketplace ^®. Your tax credit is based on the income estimate and household information you put on your Marketplace application.

Use Form 7206 to determine any amount of the self-employed health insurance deduction you may be able to report on Schedule 1 (Form 1040), line 17. You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents.

You can generally deduct the cost of individual health insurance from your taxes as a self-employed LLC member, although this ultimately depends on several factors, including the tax classification of the LLC and for whom the deduction is being taken out.

Partnerships (or rather partners in partnerships) should report the insurance premiums they've paid or covered for each partner on their K-1 forms. Then, this amount goes onto the partner's individual tax return, where they can deduct it just like a sole proprietor would.

Can 1095-A be a self-employed health insurance deduction? ›

Additionally, as someone who is self-employed, you use the premium you paid, found on your Form 1095-A to determine your self-employed health insurance deduction or itemized medical deductions on Schedule A of your tax return.

Health insurance premiums paid with your own after-tax dollars are tax deductible. For example, if you purchased insurance on your own through a health insurance exchange or directly from an insurance company, the money you paid toward your monthly premiums can be taken as a tax deduction.

Form 7206 is the newly introduced IRS form that self-employed taxpayers use to figure their deduction for health insurance costs.

Limitations and maximum deduction amounts

The deduction you can claim is generally limited to your net profit from self-employment. This means that if your net profit is less than the total amount of your health insurance premiums, you may not be able to deduct the full amount.

The deduction – which you'll find on Line 17 of Schedule 1 (attached to your Form 1040) – allows self-employed people to reduce their adjusted gross income by the amount they pay in health insurance premiums during a given year.

C-corporations are not eligible for the QBI deduction since they are their own taxable entity. You're also not eligible for the QBI deduction if you earn income as an employee rather than as a business owner or partner.

Is health insurance tax-deductible? Health insurance premiums are deductible on federal taxes, in some cases, as these monthly payments are classified as medical expenses. Generally, if you pay for medical insurance on your own, you can deduct the amount from your taxes.

A self-employed individual can deduct 100% of his/her out-of-pocket long-term care insurance premiums, up to the Eligible Premium amounts listed above [IRC 162(l)]. The portion of LTCi premiums that exceeds the Eligible Premium (see Table 1) amount is not deductible as a medical expense.

Medical Expense Deduction

On Form 1040, medical and dental expenses are deducted on Schedule A, Itemized Deductions. You can deduct only the amount of your medical and dental expenses that is more than 7.5 percent of your adjusted gross income shown on Form 1040, line 38.

If you're self-employed and receive Medicare, you might be able to deduct all your Medicare insurance premiums. The IRS has ruled that Medicare recipients who have self-employment income may deduct the premiums they pay for Medicare coverage, the same as the premiums for any other type of health insurance.