Self-Employment Health Insurance

Line 31

If you have self-employment income, then you can take a deduction for health insurance expenses. Before claiming this tax deduction, you must calculate your allowable health insurance deduction. Take your self-employment income, and subtract the 50% deduction for self-employment taxes, and subtract any retirement contributions you make to SEP-IRA, SIMPLE-IRA, or Keogh plan. The remainder is your allowable deduction for health insurance expenses.

If your self-employment income is from a Schedule C business, and you report a net loss on Form 1040 Line 12, then you are not eligible to deduct your health insurance costs.

You can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents. However, you cannot deduct any insurance costs for any months you were eligible to participate in a group health insurance plan through your or your spouse's employer. For example, if you paid for 12 months of health insurance coverage for yourself and your family, but you became eligible to participate in your spouse's group health insurance in December, then you can deduct only 11 months worth of insurance premiums.

Any health insurance premiums that you cannot deduct on Line 31, you may be able to deduct as a medical expense on Schedule A.

Back to Step 5: Adjustments to Income