100% of your premiums are deductible — if you know the rules

Self-employed workers can deduct 100% of health, dental, and vision insurance premiums paid for themselves, their spouses, and their dependents. This is an above-the-line deduction — it reduces your adjusted gross income directly, without requiring you to itemize. For someone paying $600/month in premiums at a 22% marginal rate, that's over $1,580 in tax savings.

The net profit limitation

The deduction can't exceed your net profit from the business. If your self-employment income was $10,000 and your premiums totaled $15,000, you can only deduct $10,000 on Schedule 1. The remaining $5,000 isn't lost — it can potentially be claimed as a medical expense on Schedule A, subject to the 7.5% AGI floor. Low-income years with high premiums are the scenario where this limit actually bites.

The spouse employer coverage rule

If you or your spouse is eligible to participate in an employer-subsidized health plan — even if you don't actually enroll — you generally can't claim the self-employed health insurance deduction for any month that eligibility existed. "Eligible" means the employer offers coverage; it doesn't matter whether you took it. This applies on a month-by-month basis, so partial-year eligibility is possible.

What qualifies

Qualifying premiums include medical, dental, and vision insurance. Long-term care insurance premiums also qualify, subject to age-based limits. Premiums for a policy in your name, your spouse's name, or your business name can all qualify. Out-of-pocket costs — copays, deductibles, prescriptions — do not qualify for this deduction (though they may qualify as itemized medical expenses on Schedule A).

Where it goes on your return

The deduction goes on Schedule 1, Part II, Line 17 (self-employed health insurance deduction), which flows to Form 1040. It reduces your AGI, which reduces your taxable income for both federal income tax and, in most states, state income tax. It does not reduce SE tax.

Deductibility depends on specific facts including employer coverage eligibility and business structure. Consult a tax professional before claiming this deduction.