If you’re self-employed, there’s a valuable tax deduction that you might be overlooking: the self-employed health insurance deduction. This allows you deduct the cost of health insurance premiums paid for yourself, your spouse, and your dependents, including your children under the age of 27, even if they aren’t claimed as dependents on your tax return.
Why This Deduction Matters
The self-employed health insurance deduction is what’s called an “above-the-line” deduction, which means it directly reduces your adjusted gross income (AGI)—potentially lowering both your income tax and self-employment tax.
Here’s an example:
A self-employed individual with no dependents earns a net profit of $50,000 in 2025. If they pay $4,000 in health insurance premiums, they could save roughly $425 in taxes thanks to this deduction.
That’s real money back in your pocket!
A Few Important Rules to Know
1. Eligibility Matters
You cannot take this deduction for any month that you or your spouse were eligible for a subsidized employer health plan – even if you choose not to enroll.
2. Marketplace Coverage & Premium Tax Credit
If you bought your insurance through the Health Insurance Marketplace and received a premium tax credit, you’ll need to coordinate the deduction with that credit. You can only deduct the portion of premiums you actually paid out of pocket, not the part covered by credit.
What to Share With Your Tax Preparer
To make sure you’re getting the full deduction you’re entitled to, be prepared to provide the following:
1. Employer-Sponsored Coverage
• Were you or your spouse offered insurance by an employer during the year?
• If yes, submit Form 1095-C from the employer.
2. Marketplace (Obamacare) Coverage
• Did you purchase insurance through the Marketplace?
• If yes, provide Form 1095-A.
Note: If your income ended up being lower than expected, you might have overpaid for your health coverage. In this case, a refundable credit could be added to your return—or applied to reduce other taxes you owe.
3. Private Health Insurance
• If you bought insurance outside of an employer or the Marketplace, provide the total amount you paid and Form 1095-B.
Our Team of Professionals Can Help
We’re here to guide you through complex tax matters, so you can keep more of what you earn. We want to ensure you take every deduction you’re eligible for and avoid paying a dollar more than necessary.
If you have questions about this deduction, or anything else related to your self-employed taxes, contact our team today at 417.380.5000 or transportation@abacuspro.com.
