What this line means
The cost of health insurance premiums you paid as a self-employed individual for yourself, your spouse, your dependents, and your children under age 27. This above-the-line deduction covers medical, dental, and qualified long-term care insurance. The deduction cannot exceed your net profit from the business that establishes your eligibility for the insurance.
Does this apply to you?
- You are self-employed (sole proprietor, partner, or S corporation shareholder owning more than 2%)
- You pay for your own health, dental, or long-term care insurance
- You are not eligible to participate in a subsidized health plan through your spouse’s employer or another employer
- You have net self-employment income from Schedule C, Schedule F, or a partnership
Easy to overlook
The deduction is lost for months you were eligible for an employer plan You cannot claim this deduction for any month in which you were eligible to participate in a subsidized health plan maintained by any employer — yours or your spouse’s. 1 “Eligible” means the plan was available to you, not that you enrolled. If your spouse’s employer offered family coverage and you declined it, you cannot deduct your self-purchased insurance for those months. The deduction is calculated on a monthly basis. General filing pattern — deduction claimed while eligible for employer plan
Children under 27 qualify regardless of dependent status You can include insurance premiums for your children who are under age 27 at the end of the year, even if they are not your tax dependents. 2 This applies to adult children who have aged out of dependent status but are still on your health plan. The age cutoff is 27 for this deduction, which differs from the dependent rules. IRS Publication 535 — Business Expenses
Watch out for this
Deducting more than your net profit from the business. The self-employed health insurance deduction is limited to the net profit from the trade or business under which the insurance plan is established. If your Schedule C shows $8,000 net profit and you paid $12,000 in premiums, your deduction is capped at $8,000. The remaining $4,000 is deductible as a medical expense on Schedule A if you itemize and exceed the 7.5% AGI threshold.
Footnotes
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IRS Publication 535, Business Expenses, Self-Employed Health Insurance Deduction. https://www.irs.gov/pub/irs-pdf/p535.pdf ↩
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IRS Publication 535, Business Expenses, Qualifying Insurance Plans. https://www.irs.gov/pub/irs-pdf/p535.pdf ↩