Can I deduct health insurance premiums if I'm self-employed in 2025?

Yes — and it is one of the best deductions available to the self-employed. If you are self-employed and pay for your own health insurance, you can deduct 100% of your premiums as an above-the-line deduction (meaning it reduces your AGI directly, even if you take the standard deduction).

What you can deduct:

• Medical, dental, and vision insurance premiums for yourself
• Premiums for your spouse
• Premiums for your dependents
• Premiums for your children under age 27, even if they are not your dependents
• Long-term care insurance premiums (subject to age-based limits)

Where to claim it:

Use Form 7206 (introduced in 2023, replacing the old worksheet) to calculate your deduction, then carry it to Schedule 1, Line 17 of your Form 1040.

The key limitation — the net profit cap:

You cannot deduct more in health insurance premiums than your business earned. If your net Schedule C profit is $8,000 but you paid $12,000 in premiums, your deduction is capped at $8,000. You can claim the excess on Schedule A as a regular medical deduction (subject to the 7.5% AGI floor), but only if you itemize.

Eligibility rules:

• You must have a net profit from self-employment, or an S-corp salary, to take this deduction
• You cannot take the deduction for any month in which you (or your spouse) were eligible to participate in an employer-subsidized health plan — even if you chose not to enroll
• The insurance plan must be established under your business

Common mistake — marketplace plans: If you bought insurance through the ACA marketplace and received an advance premium tax credit (PTC), the health insurance deduction and the PTC interact. You can only deduct the net premiums you actually paid out of pocket (premiums minus the PTC). Form 7206 walks you through this calculation.

ACA marketplace vs. employer offer: If your spouse has access to employer-sponsored insurance that covers you, you cannot take the self-employed health insurance deduction — even if their plan is expensive or you declined it. Eligibility for the plan is what disqualifies you, not enrollment.

Why this deduction matters: Unlike medical expenses on Schedule A (which require itemizing and are limited to expenses above 7.5% of AGI), the self-employed health insurance deduction is uncapped (up to net profit), available to everyone regardless of whether they itemize, and reduces both income tax and the adjusted gross income used to calculate other phase-outs.