The Self-Employed Health Insurance Deduction, Explained
Short answer: if you're a freelancer who pays for your own health coverage and your business turns a profit, you can usually deduct 100% of your premiums — medical, dental, and qualifying long-term care — directly against your income. It's an "above-the-line" deduction, meaning you get it even if you take the standard deduction. It lowers your income tax, but not your self-employment tax. Here's who qualifies, what counts, and the one limit that trips people up.
Trying to see what you actually keep after every deduction and tax? The free Freelance Rate Calculator works backward from take-home → so you can price coverage into your rate.
Who qualifies
You can take the deduction if all of these are true:
- You're self-employed — a sole proprietor, single-member LLC, partner, or more-than-2% S-corp shareholder — with a net profit for the year.
- The policy is established under your business (in your name or the business's name — for sole proprietors, your own name is fine).
- You were not eligible for subsidized coverage through an employer (yours or a spouse's) for the months you're claiming. Eligibility, not enrollment, is what disqualifies you.
What premiums count
| Premium type | Deductible? |
|---|---|
| Medical insurance for you, spouse, dependents | Yes |
| Dental and vision premiums | Yes |
| Qualifying long-term care insurance | Yes, up to age-based limits |
| Marketplace (ACA) plan premiums you paid | Yes — minus any premium tax credit |
| Months you were eligible for an employer/spouse plan | No |
See the deduction in your real numbers. Use the free Freelance Rate Calculator → to fold health premiums into your costs and see the rate you need to cover them after tax — instead of discovering at year-end that coverage ate your margin.
The catch: it doesn't cut self-employment tax
This is the single most misunderstood point. The self-employed health insurance deduction reduces your income tax, but it does not reduce the 15.3% self-employment tax — that's still calculated on your full net profit. So the premiums are a great income-tax break, but don't assume they shrink your quarterly self-employment-tax bill. (For how that tax works, see the self-employment tax guide.)
The net-profit limit
Your deduction can't exceed your business's net profit for the year. If you earned $4,000 in net profit but paid $6,000 in premiums, you can only deduct $4,000 here; the remaining $2,000 may be deductible elsewhere as a medical expense if you itemize. In a loss year, you get no self-employed health deduction at all.
A worked example
You're a freelancer with $70,000 net profit and pay $550/month for a marketplace medical + dental plan = $6,600 for the year, with no premium tax credit. Because your profit easily exceeds the premiums, you deduct the full $6,600 from income. In a 22% bracket that's about $1,450 off your income tax. Your self-employment tax is unchanged — still figured on the $70,000.
This is one line on a longer list — keep the rest with the freelance tax deductions checklist, and don't forget to set the money aside via how much to set aside for taxes.
Price your coverage into your rate
Health insurance is one of the biggest costs a freelancer carries that a W2 employee never sees — and it has to come out of your rate, not your hope. The $9 Freelance Rate & Tax Calculator spreadsheet builds premiums and deductions into the math so the rate you charge actually funds your coverage after tax. Billing clients for that work? Get the calculator + invoice template in the $14 Starter Pack →
Frequently asked questions
Can a self-employed person deduct health insurance premiums?
Yes. If you are self-employed with a net profit and were not eligible for subsidized coverage through an employer or spouse, you can generally deduct 100% of your medical, dental, vision and qualifying long-term care premiums for yourself, your spouse and dependents. It is an above-the-line deduction, so you get it even if you take the standard deduction.
Does the self-employed health insurance deduction reduce self-employment tax?
No. It reduces your income tax only. Your 15.3% self-employment tax is still calculated on your full net profit, so don't expect the premiums to shrink your quarterly self-employment-tax payments. It is purely an income-tax break.
How much health insurance can I deduct as a freelancer?
Up to 100% of your qualifying premiums, but capped at your business's net profit for the year. If premiums exceed your profit, you can only deduct up to the profit through this deduction; the excess may be claimed as an itemized medical expense instead. In a loss year you cannot take the self-employed health deduction.
Do I have to itemize to claim it?
No. The self-employed health insurance deduction is taken as an adjustment to income on Schedule 1, above the line, so you can claim it and still take the standard deduction. That's what makes it more valuable than deducting medical costs as an itemized expense.
Can I deduct premiums if my spouse has employer coverage available?
Not for the months you were eligible to join your spouse's subsidized employer plan, even if you didn't enroll. Eligibility is what disqualifies you, month by month. If that eligibility only covered part of the year, you can still deduct premiums for the months you weren't eligible.