Self-Employed Health Insurance Deduction.

In plain English

The self-employed health insurance deduction lets self-employed people deduct what they pay in premiums for medical, dental, and qualifying long-term care insurance for themselves, a spouse, and dependents. It is an above-the-line deduction, meaning it lowers your adjusted gross income and you get it even if you do not itemize. The deduction is limited to the net profit from the business the plan is tied to, and it does not reduce your self-employment tax. You also cannot take it for any month you were eligible to join an employer-subsidized plan, including a spouse's plan.

01Why it matters

Health premiums are one of the biggest costs of being self-employed, and this is one of the few ways to get the full pre-tax benefit on them without an employer, which can save real money each year.

02The math, step by step

You are self-employed and pay $700 a month, $8,400 for the year, for a health plan. If your business net profit is at least $8,400 and you had no access to a spouse's subsidized plan, you can deduct the full $8,400 from your income, lowering your income tax. It will not reduce the self-employment tax you owe.

03What this is NOT

04Receipts

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