Self Employed Health Insurance Deduction Simplified !

Self Employed Health Insurance DeductionCan a self employed Individual claim health insurance deduction from taxable income? The answer is definitely yes. Anyone who has self-employment income can claim health insurance deduction, not only for the premium paid for himself but for also for the spouse, and dependents.

Who can claim health insurance deduction?

As you know there are various ways a person can have self-employment income.  IRS prescribes difference schedules to be attached to the different types of self employment income.  Following types of Individuals cal claim health insurance premium deduction while computing the taxable income.

  • Proprietorship concern has to attach Schedule C
  • A farmer has to attach Schedule F  or
  • General partners in partnerships,
  • actively participating members in LLCs
  • employees of S-corporations who own 2 percent or more of the corporation’s stock.

What can be deducted?

You can deduct cost of premiums paid for medical insurance, dental insurance, and long-term care insurance issued to cover

  • you,
  • your spouse,
  • your dependents, or
  • dependent adult children below 27 years of age as of the last day of the tax year.

The health insurance policy can be in the name of your business if you don’t operate under your own name.

What are the limitations to claim of health insurance deduction?

  1. No deduction for health insurance if your health is insured by your employer. Similarly, if your spouse is employed and getting health insurance benefit from an employer, the premium paid for months for which he/she is getting health insurance benefit from an employer, will not be claimable.
  2. Your self-employment income reported on appropriate schedule must be more or equal to the insurance deduction. In other words, health insurance deductible amount is limited to the extent of business income reported on Schedule C or Schedule F

Any tip for maximizing health insurance deduction?

Well, it depends on the fact if you claim itemized deduction which is not very beneficial to for people having self-employment income. If calculation shows otherwise, you can claim health insurance premium cost on Schedule A rather than as a business expense.   But this, I found seldom, very advantageous for most of the people who have self-employment income.

Have you read New 20% deduction to QBI by TCJA

IRS page on self-employment 



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