Self-employed health insurance deduction: who qualifies and how much it saves

If you're self-employed and pay for your own health insurance, you can usually deduct the premiums: medical, dental, vision and qualified long-term care, for you, your spouse, your dependents and any child under 27. It's one of the biggest deductions freelancers miss, partly because it doesn't go on Schedule C. It goes on Schedule 1 (Form 1040), line 17.

Marketplace open enrollment for 2027 runs from November 1, 2026 to January 15, 2027. Enroll by December 15 if you want coverage to start on January 1.

Who qualifies

You need a net profit from self-employment for the year: a profit on Schedule C or Schedule F, net earnings as a partner, or wages as a more-than-2% shareholder of an S corporation that pays or reimburses the premiums.

The plan has to be "established under your business", but for a Schedule C filer that's easy: the policy can be in your own name. A Marketplace plan, a plan bought straight from an insurer and Medicare premiums you pay yourself all count.

The employer-plan rule

You can't deduct premiums for any month in which you were eligible for a subsidized health plan through an employer: yours, your spouse's, or the employer of a dependent or a child under 27. It's eligibility that counts, not whether you signed up.

This catches a lot of people with a day job or a spouse with workplace coverage. If you were eligible for part of the year, you can still deduct the premiums for the other months. The IRS applies the rule separately to long-term care insurance and to other health insurance.

The profit limit

The deduction can't be more than your net profit from the business the plan is under, after subtracting the deductible half of self-employment tax and any SEP, SIMPLE or solo 401(k) contributions for yourself. A freelancer with $4,000 of profit and $7,000 of premiums can deduct $4,000 at most. Premiums you can't take here can go on Schedule A as a medical expense if you itemize.

How much it saves

Example: single, $60,000 profit, $550 a month in premiums with no subsidy (2026)

	Without the deduction	With it
Self-employed health insurance deduction	$0	$6,600
Taxable income	$31,729	$26,449
Income tax	$3,559	$2,926
Saved		$633

The example takes the standard deduction and the QBI deduction. The saving is a little less than 12% of $6,600 because the premiums also reduce your qualified business income.

It doesn't reduce self-employment tax. You still pay that on your full profit. That's the main difference from deducting an expense on Schedule C.

Marketplace plans and the premium tax credit

If you buy through HealthCare.gov or a state Marketplace and get advance payments of the premium tax credit, you can only deduct what you paid yourself, and the two calculations depend on each other. The deduction lowers your income, which raises your credit, which lowers the premiums you can deduct. IRS Publication 974 has the worksheets, and tax software does the loop for you.

The extra subsidies Congress added in 2021 expired at the end of 2025. For 2026 and 2027, the credit is only available if your household income is between 100% and 400% of the federal poverty line, and above 400% you have to repay all the advance payments you received. Two things follow for freelancers:

• Estimate your income carefully when you apply. A good year can push you over the line, and the repayment comes due when you file. The free calculator gives you a solid profit estimate to start from.
• The deduction itself lowers the income the Marketplace looks at, along with retirement contributions. If you're close to the 400% line, they can be the difference.

Forms you'll use

Most people work out the deduction with the worksheet in the Form 1040 instructions. You need Form 7206 instead if you had more than one source of self-employment income, you include long-term care premiums, or you file Form 2555 for foreign earned income. Either way the result goes on Schedule 1, line 17.

Keep your premium statements and, for a Marketplace plan, Form 1095-A, which arrives by early February. Log each month's premium as you pay it, so the yearly total is ready when you file.