Self-Employed Health Insurance Deduction: Who Qualifies

The IRS says one of four statements must be true. You were self-employed with a net profit reported on Schedule C or Schedule F. You were a partner with net earnings from self-employment reported on Schedule K-1 (Form 1065). You used an optional method to figure net earnings on Schedule SE. Or you received wages from an S corporation in which you were a more-than-2% shareholder.

Do 1099 workers qualify? The IRS says Schedule C is where you report income or loss from a business you operated as a sole proprietor, or gig work you performed. If that is you and the business had a net profit, you meet the first statement.

The plan must also be established, or considered established, under your business. Your personal services must also have been a material income-producing factor in the business. For Schedule C or F filers, the policy can be in your name or the business's name.

The deduction can cover medical, dental, and vision insurance, plus qualified long-term care insurance, for you, your spouse, and your dependents. It can also cover your child who was under age 27 at the end of the year, even if the child was not your dependent. A child includes a son, daughter, stepchild, adopted child, or foster child.

Long-term care premiums have a cap for each person covered: the smaller of the premiums paid or an age-based limit, based on the person's age at the end of the year. For 2025, those limits run from $480 for age 40 or younger up to $6,020 for age 71 or older. These limits change each year.

Not every policy counts. IRS Publication 502 says premiums for policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized are not medical insurance premiums. Ask a tax professional whether your policy, and each charge on your premium bill, counts.

The first limit is about employer plans. The IRS says you cannot take the deduction for any month you were eligible to participate in an employer plan that your employer, or your spouse's employer, helps pay for, even if you did not join. The same applies to the employer of your dependent or your child under 27.

Example: say you became eligible for your spouse's employer plan on September 30. Because you were eligible for part of September, you could not use premiums for September through December to figure the deduction.

The second limit is about income. The IRS worksheet uses your net profit and other earned income from the business the plan is established under, minus the deductible part of self-employment tax and self-employed retirement plan deductions. Your deduction is the smaller of your premiums or that figure.

No. The IRS says you cannot subtract it when figuring net earnings for self-employment tax from the business the plan is established under. It lowers the income your income tax is based on, not the self-employment tax base.

You do not need to itemize. The deduction goes on Schedule 1 as an adjustment to income, not on Schedule A. Special rules can apply in some situations; the Form 7206 instructions explain them.

Form 7206 is the IRS form for figuring this deduction. It replaced the worksheet in Publication 535, which the IRS has discontinued. The result goes on Schedule 1, line 17 on the 2025 forms. Line numbers can change by year.

Generally, you can use the worksheet in the Form 1040 instructions. You must use Form 7206 if you had more than one source of income subject to self-employment tax, file Form 2555, or use qualified long-term care premiums. Plans under different businesses each get their own Form 7206.

Keep the records below with your tax files. A tax professional can tell you how long to keep them.

Florida does not impose a personal income tax, according to the Florida Department of Revenue, so this deduction matters for your federal return. A Prime Health Consultants advisor can help you compare the questions that matter for your situation when you look at coverage. Advisors are insurance advisors, not tax advisors.

Your plan documents and tax forms control. Short-term health plans, fixed indemnity plans, health care sharing ministries, and some government or church plans can work differently, and whether a policy counts is a question for your tax professional.