Self-employed health insurance refers to individual or family health coverage purchased by someone who works for themselves — a freelancer, independent contractor, sole proprietor, or small business owner without employees. Unlike salaried employees, self-employed individuals pay the full premium themselves with no employer contribution.
The good news: self-employed individuals can deduct 100% of their health insurance premiums from their federal taxable income, which reduces both income tax and self-employment tax. This deduction is taken on Schedule 1 of your tax return and does not require itemizing.
Your coverage options as a self-employed person:
Yes — 100% of your health insurance premiums are deductible as a self-employed person, as long as you’re not eligible to participate in an employer-subsidized plan through a spouse. This deduction reduces your adjusted gross income (AGI), which can also lower your MAGI and increase your Marketplace subsidy eligibility. The deduction applies to premiums for yourself, your spouse, and your dependents.
Your net self-employment income — after business deductions — is what determines your MAGI for subsidy purposes. Variable income is one of the trickier parts of Marketplace enrollment for freelancers and contractors. If your income fluctuates year to year, estimating conservatively and updating your income mid-year (if it comes in higher) helps avoid a large repayment when you file taxes.
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