Paying for your own health insurance is one of the biggest expenses of working for yourself. The good news is that the tax code gives many self-employed people a way to deduct those premiums. The less obvious part is that the deduction doesn’t work like your other business expenses, and some freelancers can’t claim it at all.
This guide explains who qualifies, how much you can deduct, where it goes on your return, and the catch with ACA marketplace subsidies.
The Short Answer
Yes, many freelancers can deduct the premiums they pay for health insurance through the self-employed health insurance deduction. To qualify, you generally need to:
- Be self-employed with a net profit for the year
- Pay the premiums yourself (not through an employer plan)
- Not be eligible for an employer-subsidized health plan during the months you claim
What Premiums Can You Deduct?
The deduction can cover premiums for:
- Medical insurance, including marketplace and private plans
- Dental insurance
- Qualified long-term care insurance (with age-based limits)
- Medicare premiums, if you’re self-employed and eligible
The coverage can be for you, your spouse, and your dependents, as well as your children who are under age 27 at the end of the year, even if they aren’t dependents.
What’s not included: Deductibles, copays, prescriptions, and other out-of-pocket medical costs aren’t part of this deduction. Those are medical expenses that can only be deducted if you itemize and meet the threshold on Schedule A.
It’s Not a Schedule C Expense
This is where many freelancers get confused. You do not deduct health insurance premiums on Schedule C as a business expense.
Instead, it’s an above-the-line deduction, also called an adjustment to income. You claim it on Schedule 1 of your Form 1040, using Form 7206 to figure the amount. Because it reduces your adjusted gross income (AGI), you get it even if you take the standard deduction and don’t itemize.
Does It Reduce Self-Employment Tax?
No. The deduction lowers your income tax, but it doesn’t reduce your net earnings for self-employment tax. Self-employment tax is figured on your Schedule C profit before this deduction. Our guide to self-employment tax explained shows how that calculation works.
The Employer Plan Rule
You can’t claim the deduction for any month in which you were eligible to participate in an employer-subsidized health plan. That includes a plan offered by:
- Your own job (if you have a day job alongside freelancing)
- Your spouse’s employer
Note that it’s about being eligible, not whether you actually enrolled. If you could have joined your spouse’s employer plan but chose a marketplace plan instead, those months generally don’t qualify.
The IRS looks at this month by month. If you were eligible for an employer plan for the first five months of the year but not for the last seven, you may be able to deduct the premiums for those seven months.
How Much Can You Deduct?
There’s no fixed dollar cap on premiums, but the deduction has a profit limit:
- It can’t be more than your net profit from the business that established the plan, reduced by the deductible half of your self-employment tax and any self-employed retirement plan contributions.
- If your business had a loss or no net profit, you generally can’t claim it.
Example: You have a Schedule C net profit of $50,000 and paid $6,000 in qualifying premiums for months you weren’t eligible for an employer plan. Your profit is well above the premiums, so you may be able to deduct the full $6,000. If you’re in the 22% tax bracket, that could save around $1,320 in income tax.
This is an illustration only. Your result depends on your full tax situation.
The ACA Marketplace Catch
If you buy coverage through the Health Insurance Marketplace and receive the premium tax credit (subsidies), the calculation gets more complicated.
- You can only deduct the portion of premiums you actually paid yourself, after subtracting the premium tax credit.
- The deduction lowers your AGI, which can change the amount of your subsidy, which changes the premiums you paid, which changes the deduction. It’s a circular calculation.
- In this situation, the IRS directs you to use the worksheet in Publication 974 in place of the standard Form 7206 method.
Most tax software handles this loop, but it’s a good case for using software or a tax professional. Keep your Form 1095-A from the marketplace, since you’ll need it to reconcile the credit. Our guide on open enrollment and ACA subsidies explains how subsidies work.
Other Situations Worth Knowing About
- Multiple businesses or plans. If you have more than one business or plan, you may need to figure the limit separately for each one.
- LLCs, partnerships, and S corporations. Rules differ depending on your structure. Partners and S corporation shareholders who own more than 2% generally follow special reporting procedures for premiums. See our guide on sole proprietor vs. LLC and talk to a tax professional.
- Health Savings Accounts (HSAs). If you have a high-deductible plan, HSA contributions are a separate deduction.
How It Affects Your Other Deductions
The self-employed health insurance deduction reduces your qualified business income for the QBI deduction, which slightly lowers that deduction. See our guide on the QBI deduction for freelancers. It still comes out ahead overall, since you get the benefit of both.
How to Claim the Deduction Step by Step
- Gather your records: premium statements, your marketplace Form 1095-A (if applicable), and proof of the months you weren’t eligible for an employer plan.
- Figure your Schedule C net profit and your self-employment tax.
- Complete Form 7206 (or the Publication 974 worksheet if you have the premium tax credit).
- Enter the result on Schedule 1. It flows to your Form 1040 and lowers your AGI.
- Keep your documents with your tax records.
Common Mistakes to Avoid
- Putting premiums on Schedule C instead of Schedule 1
- Claiming months when you were eligible for an employer or spouse’s plan
- Deducting more than your net profit
- Including copays and out-of-pocket costs
- Ignoring the premium tax credit adjustment
- Forgetting the deduction altogether, because it doesn’t appear on Schedule C
Frequently Asked Questions
Can I deduct health insurance if I have a day job?
Only for months you weren’t eligible for an employer plan. If you could have joined your employer’s plan, those months generally don’t qualify.
Can I deduct premiums if I didn’t make a profit?
Generally no. The deduction is limited to your net profit from self-employment.
Do I need to itemize?
No. It’s an above-the-line deduction, so you can take it with the standard deduction.
Can I deduct my spouse’s or children’s premiums?
Yes, if the coverage is for your spouse, dependents, or children who are under 27 at the end of the year, subject to the same rules.
Is the deduction the same as the premium tax credit?
No. They’re different benefits that interact, so if you receive subsidies, use the special calculation.
Final Thoughts
The self-employed health insurance deduction can meaningfully reduce your tax bill, but it’s easy to miss or to claim wrongly. Remember the key rules: it’s claimed on Schedule 1, not Schedule C; it’s limited by your net profit; and it depends on whether you were eligible for an employer plan in each month.
For official guidance, visit the IRS pages on Form 7206, Publication 974, and the Self-Employed Individuals Tax Center.
Disclaimer: This article is for general educational purposes only and is not tax, legal, or financial advice. Tax rules change, so verify current details on IRS.gov or consult a qualified tax professional.
Last Update: October 22, 2026