If you work for yourself, you pay for health insurance with after-tax money unless you use a special rule. The self-employed health insurance deduction lets many sole proprietors, partners and S corporation owners deduct premiums for themselves, their spouses and their dependents. It is an adjustment to income, so you can take it even if you do not itemize deductions. This guide covers the 2025 rules, which are reported on Form 7206 or a worksheet in the Form 1040 instructions.
Who qualifies
You may qualify if, for the year, you had one of the following:
- A net profit from a business reported on Schedule C or Schedule F
- Net earnings from self-employment as a partner (shown on Schedule K-1)
- Wages from an S corporation in which you owned more than 2 percent of the stock
The plan must be established, or considered established, under your business. For a sole proprietor, the policy can be in the business's name or in your own name. Partners and more-than-2-percent S corporation shareholders face special rules about who pays the premium and how it is reported. For these owners, the partnership or the S corporation generally pays or reimburses the premium and reports it in the owner's income. See S corporation taxes and partnership taxes.
The month-by-month eligibility rule
No deduction is allowed for any month you were eligible to participate in a subsidized health plan through your own employer, your spouse's employer, a dependent's employer or the employer of a parent of your under-27 child. It does not matter whether you actually enrolled. If you were eligible for only part of the year, you may deduct premiums only for the other months.
Other limits
- Net earnings. The deduction cannot exceed the net profit of the business under which the plan was established, and the form takes other deductions into account, such as the deductible part of self-employment tax and retirement plan contributions. If you have more than one business with separate plans, a separate Form 7206 is used for each.
- No effect on self-employment tax. You cannot subtract the deduction when figuring net earnings for self-employment tax. See self-employment tax.
- Not on Schedule A. Premiums you deduct here cannot also count as medical expenses.
- Premium tax credit. If your plan came through the Marketplace and you received advance premium tax credit payments or claim the credit, the deduction and the credit depend on each other. IRS Publication 974 explains the calculation.
Long-term care premiums
You can include qualified long-term care premiums, but only up to an age-based amount per person. For 2025, based on age at the end of the year:
| Age at year-end | Maximum per person (2025) |
|---|---|
| 40 or younger | $480 |
| 41 to 50 | $900 |
| 51 to 60 | $1,800 |
| 61 to 70 | $4,810 |
| 71 or older | $6,020 |
You include the smaller of the premium paid and the limit. These amounts are adjusted each year, so use the limits shown in the instructions for the year you file.
Which form to use
For most people, the worksheet in the Form 1040 instructions is enough. You use Form 7206 if you have more than one source of self-employment income, you file Form 2555, or you include long-term care premiums.
Mistakes to avoid
- Deducting premiums on Schedule C. That would wrongly reduce self-employment tax.
- Counting months when a spouse's employer plan was available.
- Forgetting the net earnings limit when the business had a small profit or a loss.
- For S corporations, paying premiums personally without having the company reimburse and report them correctly.
- Ignoring the premium tax credit calculation for Marketplace coverage.
Related choices
Health savings accounts, premium tax credits and employer arrangements can work alongside or instead of this deduction. See HSA and health coverage credits. Small employers may also qualify for the small business health care tax credit, covered in small business tax credits.
How we can help
We prepare Form 7206, review whether your plan is set up correctly under your business, coordinate S corporation and partnership reporting, and run the premium tax credit calculation when it applies. See our individual tax preparation and business tax preparation services, or contact us.
Frequently asked questions
Can I deduct health insurance if my business lost money?
Generally not beyond the business's net earnings. If the business had no profit, the deduction may be limited or unavailable. You may still be able to deduct medical costs on Schedule A if you itemize and meet the threshold.
Does the deduction apply to my spouse and children?
Yes, to your spouse, your dependents and your children under 27 at the end of the year, subject to the eligibility rules.
Is this deduction available if I have a second job with health coverage?
Not for months you were eligible for a subsidized employer plan, even if you declined it.
I own part of an S corporation. Can I deduct premiums?
If you own more than 2 percent, usually yes, but the corporation generally has to pay or reimburse the premium and report it in your wages.
Where does the deduction go?
It is reported on Schedule 1 of Form 1040 as an adjustment to income, not on Schedule C.
Official sources
- IRS: Instructions for Form 7206, Self-Employed Health Insurance Deduction
- IRS: Publication 334, Tax Guide for Small Business
- IRS: Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.