Can I Claim Self-Employed Health Insurance as a Business Expense in United States?
Yes, self-employed people can deduct 100% of health insurance premiums for themselves, spouse, and dependents as an above-the-line adjustment on Schedule 1, even if they don't itemize. The deduction cannot exceed net self-employment earnings.
Finn does your books in United States
AccountsOS keeps the books for United States businesses, tracks tax deadlines and handles expenses, in plain English. Ask Finn about yours, no signup needed.
What Internal Revenue Service (IRS) says
IRC Section 162(l) allows self-employed individuals (including 2%+ S-corp shareholders, partners, and Schedule C filers) to deduct health, dental and qualified long-term care insurance premiums above the line. S-corp shareholders need premiums paid through the S-corp and added to their W-2 Box 1 wages. The business must show a net profit, and the deduction is limited to earned income from the business that pays for the plan. The deduction is also unavailable for any month in which the taxpayer or spouse could have joined an employer-subsidized health plan.
When you can claim
- Schedule C filer: direct deduction on Form 1040 Schedule 1
- S-corp >2% owner: premiums added to W-2 Box 1, deducted on Schedule 1
- Partner: guaranteed payment treatment, deducted on Schedule 1
- Long-term care insurance up to age-based limits
- Medicare premiums (Part B and D) for a self-employed person who is covered by Medicare
When you cannot claim
- Months in which you (or spouse) were eligible for an employer subsidized plan
- Premiums exceeding net self-employment earnings
- Insurance not for medical care (e.g., disability is separate rules)
- Premiums paid with pre-tax money through an employer cafeteria plan, which are already excluded from income
Good to know
Pro tip: If the business is an S corporation, confirm in January that the payroll provider included the premium in Box 1 wages and not in Boxes 3 and 5. The shareholder then claims the deduction on the personal return.
Important: The deduction is claimed on Form 7206 and carried to Schedule 1 of Form 1040. It reduces income tax but not self-employment tax. A 2 percent S corporation shareholder must have the S corporation pay or reimburse the premiums and report them in Box 1 of the W-2 so the premium counts as the shareholder's wages. The plan must be established under the business.
Stop guessing what you can claim in United States
AccountsOS automatically categorises expenses with Internal Revenue Service (IRS)-aware rules and tells you exactly what is claimable.
Try Free