Figure out if you can deduct certain health insurance costs as a self-employed individual.
I’m self-employed — what deductions do I qualify for?
Being self-employed has its ups and downs—but a huge benefit to working for yourself is that there might be some self-employed health insurance deductions that apply to you. These deductions and tax breaks are meant to help those who have to pay for their own health insurance, so make sure to educate yourself on what’s available to you. Read on to see if you might qualify for the self-employed health insurance deduction, and which types of policies are tax deductible.
IRS self-employed health insurance deduction
If you are insuring yourself with a medical, dental, or long-term care plan, then there might be an Internal Revenue Service (IRS) tax deduction that applies to you. You can use it to help cover the cost of the premiums for yourself and your dependents.
You can generally deduct qualifying medical and dental expenses that are more than a certain percentage of your adjusted gross income. This percentage is 7.5% of your adjusted gross income in 2017 and 2018, and scheduled to be 10% in later years.
Which plans qualify for the self-employed health insurance deduction?
If you are self-employed and have a net profit for the year, you are on the road to qualifying for a self-employed medical tax deduction for your health insurance. But it’s important to know if the plan you are currently enrolled in or are planning to enroll in also qualifies for the self-employed health insurance deduction. Here are some examples of plans and services that generally qualify for self-employed health insurance tax deductions:
- If you pay for your own premiums on a plan you bought from an insurance company, insurance broker, or your state’s health insurance exchange, then this policy may qualify for the tax deduction.
- If all your medical costs such as deductibles, copayments, and coinsurance add up to more than 10% of your income (or 7.5% in 2017 or 2018), you can most likely deduct that total cost from your taxes.
You can also choose to itemize your deductions, in which case (depending on your income) you may be able to deduct medical expenses such as:
- Prescription drug costs
- Cost-sharing fees (like copayments) for doctors, dentists, surgeons, chiropractors, psychologists, psychiatrists, and sometimes nontraditional practitioners
Visit irs.gov to see more medical expenses that might be deductible on your taxes.
Some plans do not qualify for the self-employed health insurance deduction
Even if you do qualify as a self-employed individual, and you have health insurance, there are still some plans that the self-employed health insurance deduction might not apply to. Here are some instances where your individual health insurance plan may not be tax deductible:
- If you bought an individual or family plan from an Affordable Care Act (ACA) health insurance exchange, and got an advanced premium tax credit. (You may be able to deduct the portion of the premium that you paid out-of-pocket).
- If you paid for a plan with pre-taxed money, typically it cannot be deducted from your taxes (since you already got a tax benefit by paying with pre-tax dollars).
What the self-employed medical deduction could mean for you
If you are self-employed and uninsured because of the cost, hopefully knowing about the self-employed health insurance deduction will encourage you to buy a plan. Working with eHealth will give you access to free quotes and licensed brokers.
If you already have insurance and you are a self-employed individual with a net income, you may be able to take advantage of the self-employed medical tax deductions available to you.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.