Self-employed? Your health, dental, and long-term care premiums are deductible above the line — no itemizing needed. The rules, the limits, and the traps.
Short answer: if you're self-employed and paying for your own health insurance, your premiums are deductible above the line — meaning you subtract them from income directly, with no need to itemize, up to the amount of your business profit. Medical, dental, and long-term care coverage all count, and so do premiums covering your spouse and dependents. It's one of the cleanest deductions in the code, and freelancers miss it constantly because premiums don't feel like a "business expense."
They're right about one thing: it isn't a business expense. It doesn't go on Schedule C and doesn't reduce self-employment tax. It's a personal above-the-line deduction with its own rules — an eligibility trap involving employer plans, a profit cap, and an interplay with ACA marketplace credits. We flagged it in our pillar on deductions self-employed people actually miss; here's the full picture.
Most personal medical costs are only deductible if you itemize, and only above a high threshold — which is why almost nobody deducts them. This deduction skips all of that. It comes off your income before adjusted gross income is computed, which means you get it on top of the standard deduction. Paying $800 a month in premiums? That's $9,600 straight off your taxable income, whether or not you itemize a single other thing. A lower AGI can also unlock or enlarge other tax breaks that phase out with income.
The trade-off worth restating: because it isn't a Schedule C expense, it reduces income tax only, not the 15.3% self-employment tax. Still an excellent deal — just don't expect it to shrink both.
The policy can be in your name or the business's name; for sole proprietors, a personal-name policy is fine as long as you're the one paying.
Here's the rule that disqualifies more freelancers than any other: you cannot take the deduction for any month in which you were eligible to participate in an employer-subsidized health plan — yours or your spouse's. Eligible, not enrolled. If your spouse's job offers family coverage and you decline it to buy your own plan, those months are disqualified anyway. If you freelance full-time but take a W-2 job with benefits in September, the deduction stops for September onward even if you keep paying your own premiums.
Because the test runs month by month, partial years are normal: quit your job in June, start freelancing, buy your own coverage in July — you deduct July through December. Keep a simple record of which months you (and your spouse) had no employer-plan eligibility.
The deduction can't exceed the net profit of the business under which the insurance is established (reduced by the deductible half of your SE tax and any self-employed retirement contributions). Earn $30,000 of profit and pay $8,000 in premiums: full deduction. Have a rough year with $4,000 of profit and $8,000 of premiums: you deduct $4,000, and the rest can only be lumped into itemized medical expenses, where it usually evaporates against the threshold. A loss year means no deduction at all. This is another reason profit planning matters — the deduction is only as good as the profit that supports it. Note for S corp owners: the deduction works differently for you — premiums must flow through your W-2 first, a wrinkle we cover in our S corp health insurance W-2 guide.
If you buy coverage on the ACA marketplace and receive a premium tax credit, you can't double-dip — you only deduct the premiums you actually paid out of pocket, not the portion the credit covered. And here the math turns genuinely weird: the deduction lowers your AGI, which changes the size of your premium credit, which changes how much premium you paid, which changes the deduction. It's a circular calculation, and the IRS provides iterative methods to resolve it. We're flagging it, not computing it here — this is a place where tax software or a professional earns its keep, because doing it by hand invites errors in both directions. The takeaway: marketplace + self-employed is fully workable and often generous, but the deduction and the credit are calculated together, not separately.
Deduct only what you actually paid — and let the software iterate the credit-and-deduction loop.
If your plan is a qualifying high-deductible health plan, you can layer a health savings account on top: the premium deduction above the line, plus HSA contributions ($4,400 self-only / $8,750 family for 2026) that are also above the line, grow tax-free, and come out tax-free for medical costs. For a healthy freelancer, HDHP-plus-HSA is often the strongest combination in the whole individual tax code — our piece on how an HSA can lower your taxes runs the numbers. Add a solo retirement plan and the above-the-line stack gets serious; see our solo 401(k) versus SEP IRA face-off for that piece of the puzzle.
One last habit: pay the premiums from an account you can trace — your business account or a dedicated card — so the year-end total takes one statement search, not a shoebox archaeology dig. Freelancers who skip the deduction usually skip it because reconstructing twelve months of premiums in April felt like too much work. Ten minutes of setup in January removes the excuse.
If you're self-employed and buying your own coverage, this deduction should be on your return in every eligible month — no itemizing, straight off your income, up to your profit. The traps are eligibility months, the profit cap, and the marketplace-credit circle, all manageable with clean records. Taxagon's CPAs and EAs catch this deduction — and the iterative credit math — as part of individual tax filing for self-employed clients every season; if you'd rather not navigate it alone, reach out.
This article is general information, not tax advice for your specific situation. Tax law changes; figures are for the years stated.
Talk it through with a licensed US tax professional — we'll tell you honestly whether it applies to your situation.
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