For some self-employed individuals, it’s difficult to stomach the monthly cost of health insurance. But did you know you can receive some of that money back when filing your taxes? By claiming health insurance deductions, all money won’t be lost. Below I’ll explain how this is possible and what deductions you can take.

First, health insurance deductions are in place for self-employed individuals to deduct what they pay for medical, dental, and vision care insurance premiums. But only some self-employed people can use this deduction. There are a few eligibility requirements. The IRS will help determine your eligibility on a monthly basis. One condition is that you must not be able to obtain any employer-sponsored health insurance plan. For instance, if your spouse has a full-time job and their employer offers health insurance to spouses and other family members, you may not turn it down. You can only be eligible for this deduction if you cannot obtain health insurance through an employer. Another stipulation for this deduction is that you must have earned a profit from your business during the year. If you own your own business and have yet to make at least $400 for the year, then you would not qualify.

Next, let’s go over where to find this deduction. When filing your taxes, you will fill out Form 1040, which will report your earnings to the IRS. You must include Form Schedule I, “Additional Income and Adjustments to Income.” Here, in Part II, is where you will be able to claim the health insurance deduction. The nice thing about using this deduction is that it adjusts your income right off the top by taking your earnings and then deducting what you’ve paid for health premiums. The result is a lower adjusted gross income (AGI), lowering the taxes you must pay.

Because the health insurance deduction is basically an adjustment to your income and not an itemized deduction, self-employed individuals can also include the worksheet Schedule A, “Itemized Deductions.” This will help you get back a little extra money you paid towards your health premiums and health-related expenses that you paid out of pocket. One thing to keep in mind, though, is that when going this route, you can only deduct the out-of-pocket medical expenses if they exceed 7.5% of your adjusted gross income (AGI), so it typically isn’t helpful to most unless you are a person who has many health encounters throughout the year.

Paying for medical, vision, and dental premiums is expensive. Still, it should be considered a necessity for one’s health. While the cost can be a little concerning to someone shifting from employee to self-employed, the good news is that you can retrieve some of that money back by taking the health insurance deduction.


Article by
Ava Collins
Content Writer and Researcher

Student award winner Ava Collins