Can self-employed people deduct health insurance premiums?

The two limits in the short answer trip up more filers than anything else. The deduction is tested month by month: if you (or your spouse) could have joined an employer-subsidized plan in March, the premiums you paid for March are not deductible, even if you never enrolled in that employer plan. And the deduction is capped at the earned income of the specific business under which the plan is established, so a lean year can shrink it even when the premiums were real. Mere Benefits is an insurance agency, not a tax practice, so treat this page as a map and have a tax professional confirm how the rules land on your return.

What the deduction covers

It is an above-the-line deduction, claimed via Form 7206 and Schedule 1. That means it reduces adjusted gross income whether or not you itemize, and a lower AGI can help elsewhere, including the MAGI used for ACA subsidies.

How the limits work in practice

Worked example for 2026: a sole-proprietor graphic designer in Jacksonville pays $650 per month for a marketplace plan, $7,800 for the year, and her Schedule C shows $41,000 of net profit. The full $7,800 is deductible above the line. If instead her net profit had been $6,000, the deduction would stop at $6,000 (technically at net profit minus the deductible half of self-employment tax), and the rest could only be claimed as an itemized medical expense subject to the 7.5% of AGI threshold, which most people never clear.

If she takes an advance premium tax credit, only the premium she actually pays out of pocket counts toward the deduction. The deduction and the subsidy interact in a circular calculation (the deduction lowers MAGI, which changes the subsidy, which changes the deductible amount), which is exactly the kind of loop tax software and tax professionals exist to solve.

Who qualifies, and one retiree note

The deduction is available to sole proprietors and single-member LLC owners with a profit, partners, and S corporation shareholders owning more than 2% (whose premiums must run through their W-2 to count). There is no deduction for a month you were eligible for subsidized employer coverage through any job, including your spouse’s.

Here’s what I tell clients who keep consulting income going past 65: those Medicare premiums you grumble about may be deductible against your self-employment income, and many people never claim it. Ask your tax preparer specifically about the self-employed health insurance deduction for Medicare premiums.