Is self-employed health insurance tax deductible?

Where the deduction lives: unlike Schedule C business expenses (which reduce both income tax and SE tax), the self-employed health insurance deduction sits on Schedule 1, Part II. The savings is real: at 24% marginal rate, a $15,000 annual premium saves $3,600 in federal income tax. But SE tax is unaffected because the SE tax base is Schedule C net profit, not AGI.

The spousal coverage disqualifier: if you or your spouse is eligible to participate in an employer-sponsored health plan (through a W-2 job), the self-employed health insurance deduction is disallowed for those months, regardless of whether you actually enrolled. 'Eligible' is the trigger, not 'enrolled.' A spouse who declines employer coverage to join your plan does not unlock the deduction if the employer plan was available.

S-corp owner mechanics: for a shareholder who owns 2% or more of an S-corp, the S-corp must pay premiums directly or reimburse the shareholder, then include the premium amount in Box 1 of the W-2 as taxable wages. The shareholder then deducts the amount on Schedule 1. If the S-corp does not add premiums to W-2 wages, the Schedule 1 deduction is not allowed. This is a common compliance error in small S-corps.

What qualifies: medical, dental, and vision insurance premiums for the self-employed person, spouse, and dependents. Long-term care insurance premiums (subject to IRS age-based limits, ranging from $480 to $5,960 in 2026 depending on age). Medicare premiums paid by S-corp shareholders who are not W-2 employees of that S-corp also qualify.

ACA marketplace interaction: purchasing through the ACA marketplace may qualify you for premium tax credits if household income is below 400% of the federal poverty level. The self-employed health insurance deduction reduces MAGI, which can increase your subsidy eligibility. The calculation is iterative (the deduction affects the credit, which affects the deduction), and the IRS provides a worksheet for this in Publication 974.