Understanding the Self-Employed Health Insurance Deduction

Individual and Family

Understanding the Self-Employed Health Insurance Deduction

Published on January 10, 2018


Self-employed health insurance deduction: what is self-employment?

If you are a self-employed individual, there are tax deductions provided by the government that might apply to you, and help in reducing the cost of health insurance premiums. This is great news, since paying for your own health insurance might seem like a lot to handle on your own.
Before getting into the specifics of self-employed health insurance deductions, let’s first define what self-employment is.
The IRS defines self-employed as someone who “owns an unincorporated business”. You are probably self-employed if the any of following applies to you:

  • You are a sole proprietor or independent contractor
  • You are part of a partnership that conducts business or trade
  • You are in business for yourself

Some of the most common self-employed jobs are child care workers, carpenters, and housekeepers.
Keep in mind that “self-employment” extends far beyond the three positions listed above, so it’s important to know the technical qualifications in order to really understand if you qualify for the self-employed health insurance deduction.
If you are not sure whether your occupation counts as self-employed, you can talk to a tax specialist to be sure. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.

What are self-employed health insurance tax deductions?

Self-employed medical tax deductions are meant to help self-employed individuals to pay for the cost of insuring themselves. If you are self-employed you may be able to deduct some medical costs for you, your spouse, and your dependents or adult children up to age 26. Here are the basics of what to expect with self-employed health insurance tax deductions:

  • Premiums can be deducted from your taxes. If you pay a monthly premium for individual or family health insurance, you may be able to write off this health insurance cost. This may include premiums for dental and long-term care insurance for you and your dependents.
  • You do not qualify for a self-employed health insurance deduction if you or a spouse are eligible for employer-sponsored group health insurance. If your self-employment is in addition to a full-time job that offers insurance, you generally cannot write off the cost of an individual plan.
  • A self-employed health insurance deduction does not have to be an itemized deduction. Employers can put down health insurance expenses as an itemized deduction for the year, but as a self-employed individual your self-employed health insurance tax deductions may not have to be itemized (which might work out better for you). This means the deduction may be an “above the line” adjustment to your income, which might end up being more beneficial to you.
  • Qualifying for the self-employed health insurance deduction is on a month-to-month basis. Self-employed health insurance tax deductions only apply for every month you paid for insurance yourself. So if you or your spouse gets insurance through a new job in December, but you paid for insurance individually the rest of the year, then you can only deduct January through November on your taxes.

Don’t miss out on the self-employed health insurance deduction

If you are self-employed and paying for insurance on your own, you could benefit significantly from knowing about the self-employed health insurance tax deductions, and applying them to your taxes.
This article is not designed as tax advice for your specific situation. Contact your accountant or tax advisor to learn more about the self-employed health insurance deduction. And to learn more about individual and family health insurance plans, visit eHealth.com.

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