The self-employed health insurance deduction (Form 7206)

Employees get health insurance paid with pre-tax money. Freelancers get the closest equivalent through this deduction, which is why it shows up in every freelance tax deductions checklist. The rules are short, but the monthly test and the profit limit trip people up. Part of our taxes and expenses hub.

Eligibility checklist

• You had net profit from self-employment (Schedule C, or a partner's or S corporation owner's earned income) for the year.
• The plan is established under your business. For a sole proprietor, a policy in your own name can qualify.
• The premiums cover you, your spouse, your dependents, or a child of yours who was under 27 at the end of the year.
• For each month you deduct, neither you nor your spouse was eligible for a subsidized health plan through an employer. Being eligible is what counts, even if you declined it.
• You didn't already deduct the same premiums elsewhere, such as in itemized medical expenses, or pay them with pre-tax money.

What premiums count

The profit limit

The deduction can't be more than the earned income from the business that the plan is established under: roughly, net profit minus the deductible half of self-employment tax and minus any SEP, SIMPLE or solo 401(k) contribution you made for yourself from that business. A loss year gives no deduction. Premiums over the limit can still go on Schedule A as medical expenses if you itemize.

Worked examples

If you get a premium tax credit

If your plan is from HealthCare.gov or a state exchange and you get the premium tax credit, the credit and this deduction affect each other: the deduction lowers your income, which raises the credit, which lowers the premiums you can deduct. IRS Publication 974 has the worksheets for that loop. Tax software handles it; by hand it's slow. Either way, you can never deduct premiums the credit paid for.

How to claim it

1. Finish Schedule C and Schedule SE so you know profit and the half-SE-tax deduction.
2. Total the premiums by month and drop months where you or a spouse could join a subsidized employer plan.
3. Complete Form 7206, or the simpler worksheet in the Form 1040 instructions if those instructions say it applies to you.
4. Enter the result on Schedule 1 as the self-employed health insurance deduction.
5. Keep the premium statements and, if relevant, proof of when a spouse's plan became available.

To see how the deduction fits into your total tax, compare the four profiles in how much to set aside for taxes, and run your profit through the self-employment tax calculator.

Doing this in SoloWOS

Your own health premiums aren't a Schedule C expense, so don't mark them as a deductible business expense in SoloWOS Expenses; that would lower the profit figure the set-aside is based on. If you want them in one place, log them in the Other category with the deductible box unchecked and a note like "Health premium, Form 7206", and attach the monthly statement. The profit in Expenses > Reports then stays the Schedule C number, which is the starting point for the Form 7206 limit. You can log business expenses with receipts on every plan.

This is general information about the 2025 Form 7206 rules, not tax advice. Spouse coverage, S corporation ownership, long-term care limits and premium tax credits all have extra rules; check the current Form 7206 instructions or a tax professional.