If you work as a self-employed professional or small business owner, there are numerous deductions you may be able to take to reduce your total taxable income. One key deduction is the self-employed health insurance deduction. If you’re self-employed, you may deduct up to 100% of the health insurance premiums if you meet certain criteria. Below, you’ll find the specific criteria to understand the possibilities of deducting self-employed health insurance payments.
Can the Self-Employed Deduct Health Insurance Premiums?
In addition to other tax write-offs for self-employed professionals, you can deduct health insurance if you have qualifying insurance and are a self-employed individual or freelancer. Medical insurance, qualifying long-term care coverage, and Medicare premiums Part A, B, C, and D, all qualify.
If you didn’t include Medicare or other insurance premiums on a prior year’s return, you can file an amendment to claim or increase your deduction for self-employed health insurance from previous years.
Who Qualifies for the Self-Employed Medical Deduction?
You will qualify for a self-employed health insurance deduction if you are self-employed, work in your own small business as a sole proprietor, or work as a freelancer. If you are a full-time employee for someone else, you cannot take a self-employed medical deduction.
You may deduct health insurance premiums if you have a net profit to report on Schedule C or F. You may deduct insurance premiums if you’re a general partner, a limited partner with guaranteed payments, or a shareholder with more than 2% of the outstanding stock of an S corporation. You can deduct premiums you pay for yourself, your spouse, and any dependents.
You can’t claim a health insurance premium write-off when you or your spouse are eligible for an employer-subsidized health plan. In addition, your deduction for health insurance premiums can’t exceed your reported earned income.
How Does Self-Employed Medical Deduction Work?
Unlike other business expenses, health insurance premiums are directly deductible. Whether or not you itemize other business expense deductions, you can claim health insurance deductions.
In addition to health insurance for yourself, spouse, and dependents, you may deduct health insurance premiums paid for any employees. These health insurance premiums are deductible as employee benefit program expenses on Schedule C, Form 1040.
Deduction Limits for Self-Employed Health Insurance
You cannot deduct more than your reported earned income in health insurance premiums. That means if your business is just starting and has minimal income, you cannot deduct more than its reported income.
How to Calculate the Self-Employed Health Insurance Deductions?
You may deduct up to 100% of the insurance premiums paid for health insurance for yourself, your spouse, and dependents, as long as that does not exceed the total reported income.
For example, if you pay $750 monthly for health insurance for your family of four, you may deduct up to $9,000 per year. ($750 * 12 = $9,000). You will deduct these expenses on Schedule 1, Form 1040, with your annual income tax return.
How to Claim the Self-Employed Health Insurance Deductions?
You will claim the self-employed health insurance deduction as an adjustment to your gross income on Schedule 1, Form 1040. You may claim these payments for yourself, your spouse, and any dependents. You may also deduct health insurance payments for any non-dependent children up to age 27.
Save Time Filing Taxes this Year
Correctly calculating business expenses and deductions requires excellent bookkeeping throughout the year. It can save you time and ensure you correctly calculate and claim allowed refunds, including taking the self-employed health insurance deduction. You’ll need to keep careful records of all receipts and track allowed deductions.
doola Books can help with bookkeeping and invoicing for businesses or help you find creative tax deductions. It is designed for busy founders to help businesses of all sizes streamline bookkeeping and file taxes more easily. Ready to get started? Get doola Books here!
FAQs
Can both health insurance premiums for the self-employed and family members be deducted?
Health insurance premiums for self-employed professionals, their spouses, and dependents can be deducted. However, you may not deduct health insurance premiums if you or your spouse are eligible for employer-sponsored plans.
What documentation is required to claim the self-employed health insurance deduction?
You will need to keep receipts of health insurance premiums paid to claim the self-employed health insurance deduction. Most plans offer online statements, which makes it easier to keep track of monthly insurance costs. Learn more about deductions you can claim without a receipt here.
Are there any income limitations for claiming the deduction?
There are no upper-income limitations for claiming the self-employed health insurance deduction. However, you cannot claim more in health insurance deduction than your total income.
Can the deduction be claimed if I participate in a Health Savings Account (HSA)?
Yes, you can claim HSA contributions that you or someone other than an employer make to your HSA account. If you don’t itemize your deductions on Form 1040, you can still claim HSA contributions as deductions.
What happens if I mistakenly take the deduction for health insurance premiums paid to cover my employees?
You can amend your tax return to correct any mistakes in your original filings. Health insurance premiums for your employees are reported as employee benefit program expenses on Form 1040, Schedule C.
Table of contents
Can the Self-Employed Deduct Health Insurance Premiums?Who Qualifies for the Self-Employed Medical Deduction?How Does Self-Employed Medical Deduction Work?Deduction Limits for Self-Employed Health InsuranceHow to Calculate the Self-Employed Health Insurance Deductions?How to Claim the Self-Employed Health Insurance Deductions?Save Time Filing Taxes this Year
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