If you’re self-employed and had a net profit, you can generally deduct the total amount you paid for health insurance for yourself, your spouse, your dependents and a child under 27, without itemizing. You claim it on Schedule 1 (Form 1040), line 17, and the IRS says to figure the amount with Form 7206 (Form 7206 instructions). It is not a Schedule C expense.
Three limits apply:
- It’s lost for any month you (or your spouse) were eligible for a subsidized employer plan.
- It can’t exceed your net profit from the business, minus related deductions.
- If your coverage comes from the Marketplace with a premium tax credit, the credit and the deduction have to be figured together.
Which tax year this guide covers
The Form 7206 and instructions linked here are the 2025 versions. The IRS lists them as the current revision on its Form 7206 page. The form for the 2026 tax return will be published later. The rules below are the ones in the current instructions, and I’ll update the guide if the IRS announces changes. Dollar amounts labeled 2026, such as the long-term care limits, come from IRS guidance already published for that year.
Who can take it
You can use the deduction if one of these applies to you, per the Form 7206 instructions:
- You’re self-employed and had a net profit on Schedule C or Schedule F.
- You’re a partner with net earnings from self-employment.
- You used one of the optional methods to figure net earnings on Schedule SE.
- You’re a more-than-2% S corporation shareholder with wages from that S corporation, under separate rules.
The plan must be established under your business. For a sole proprietor, the Form 7206 instructions say the policy can be in the business’s name or in your own. Partners and more-than-2% S corporation shareholders have extra rules: if you pay the premiums yourself, the partnership or the S corporation has to reimburse you and report the amount (as guaranteed payments, or as W-2 wages) for the plan to count as established under your business.
What premiums count
- Medical, dental and vision insurance for you, your spouse and your dependents.
- Coverage for your child who was under 27 at the end of the year, even if the child isn’t your dependent.
- Medicare premiums you voluntarily pay for coverage in your name that’s similar to private health insurance.
- Qualified long-term care insurance, but only up to an age-based limit per person. For 2026, those limits are, per Rev. Proc. 2025-32:
| Age at end of 2026 | Max long-term care premium counted |
|---|---|
| 40 or under | $500 |
| 41–50 | $930 |
| 51–60 | $1,860 |
| 61–70 | $4,960 |
| Over 70 | $6,200 |
The 2025 Form 7206 uses the 2025 limits instead: $480, $900, $1,800, $4,810 and $6,020 for the same age bands.
The month-by-month employer plan rule
Watch out
This rule often affects freelancers with a working spouse. You can’t take the deduction for any month you were eligible to participate in a subsidized health plan offered by your employer or your spouse’s employer, or by the employer of your dependent or your under-27 child. It applies even if you didn’t enroll: eligibility is enough. The test runs month by month, so a change mid-year only affects the months it covers.
Say your spouse’s employer offered subsidized family coverage until your spouse left that job on June 30, 2026. You kept paying $600 a month for your own individual policy all year.
- Jan: Eligible for spouse's employer plan: don't count
- Feb: Eligible for spouse's employer plan: don't count
- Mar: Eligible for spouse's employer plan: don't count
- Apr: Eligible for spouse's employer plan: don't count
- May: Eligible for spouse's employer plan: don't count
- Jun: Eligible for spouse's employer plan: don't count
- Jul: Premiums count
- Aug: Premiums count
- Sep: Premiums count
- Oct: Premiums count
- Nov: Premiums count
- Dec: Premiums count
Illustrative. January–June premiums ($3,600) can't be used for the deduction; July–December premiums ($3,600) can.
Only the July–December premiums, 6 × $600 = $3,600, go toward the deduction. The January–June premiums can still count as medical expenses on Schedule A if you itemize.
The net-profit limit
The deduction can’t be more than the earned income from the business under which the plan is established. On Form 7206, that’s your net profit minus the business’s share of the deductible half of self-employment tax, minus any SEP, SIMPLE or qualified plan contributions you made for yourself through that business. With a loss or a very small profit, this is the limit that applies. The self-employment tax calculator gives you the deductible half of SE tax for your profit.
For example, with $5,000 of net profit, self-employment tax is $707 and half of it is $354. The limit is $5,000 − $354 = $4,646. If your premiums were $7,200, only $4,646 is deductible here. The rest can go to Schedule A as a medical expense if you itemize.
Where it goes: Schedule 1, not Schedule C
The deduction is an adjustment to income on Schedule 1 (Form 1040), line 17. It lowers your AGI, but it isn’t a business expense. The Schedule C instructions say not to include on line 14 any contributions you made on your own behalf as a self-employed person to an accident and health plan, and point you to Schedule 1, line 17 instead (Schedule C instructions). So your Schedule C profit stays the same, and so does your self-employment tax.
How to fill out Form 7206
The form walks you through the same limits described above, in order. Line numbers here are from the 2025 form:
- Lines 1 and 2: your premiums. Line 1 is the total you paid for coverage under your business, leaving out any month you were eligible for a subsidized employer plan. Line 2 is for qualified long-term care insurance, where each person’s premium is capped by age. Line 3 adds them.
- Line 4: your net profit from the business under which the plan is established. Skip to line 11 if the business is an S corporation.
- Lines 5 to 7: only if you have more than one profitable business. They give the business with the plan its share of the deductible half of self-employment tax. With a single business, that share is the whole amount.
- Lines 8 to 10: the net-profit limit. Subtract the deductible part of self-employment tax, then subtract any SEP, SIMPLE or qualified plan contribution you made for yourself through the same business (Schedule 1, line 16).
- Lines 11 to 13: S corporation owners and foreign earned income. More-than-2% S corporation shareholders use their W-2 Medicare wages here. Line 12 only matters if you file Form 2555.
- Line 14: the deduction. It’s the smaller of line 3 (what you paid) or line 13 (what the limit allows). That goes on Schedule 1, line 17.
If you have a plan under a different business, use a separate Form 7206 for each one.
Do you need the form? The instructions say you can generally use the worksheet in the Form 1040 instructions instead. You must use Form 7206 if you had more than one source of income subject to self-employment tax, if you file Form 2555, or if you’re including long-term care premiums. If the plan came through the Marketplace and you got advance payments of the premium tax credit or are claiming it, use Publication 974 instead of either. The instructions are at irs.gov/pub/irs-pdf/i7206.pdf.
What the deduction does, and doesn’t, reduce
- It reduces income tax. It’s claimed on Schedule 1 (Form 1040), line 17, and lowers your AGI.
- It does not reduce self-employment tax, per the Form 7206 instructions.
- It slightly reduces your QBI deduction, because the Form 8995 instructions count it as an item that lowers qualified business income. See The QBI Deduction Explained.
Worked example: a single freelancer paying $600 a month
You’re single with $60,000 of net profit, no employer plan available to you in any month, and you pay $7,200 in premiums for 2026 ($600 × 12). You take the standard deduction.
- 1$7,200
Premiums paid (12 eligible months)
$600 × 12
- 2$60,000
Net profit
- 3−$4,239
Deductible half of SE tax
$60,000 × 92.35% × 15.3% ÷ 2
- 4$55,761
Net-profit limit
$60,000 − $4,239 (no retirement contributions)
- 5$7,200
Deduction (smaller of premiums or limit)
- 6$3,559
Federal income tax without the deduction
Taxable income $31,729 after standard and QBI deductions
- 7$2,868
Federal income tax with the deduction
Taxable income $25,969 (QBI deduction also shrinks, to $6,492)
- 8$691
Income tax saved
Self-employment tax stays $8,478 either way
Illustrative. Single filer, 2026 standard deduction ($16,100) and tax rate schedule, 20% QBI deduction, no other income, credits or Marketplace subsidy. Rounded to the dollar.
A $7,200 deduction saves $691 here, not $7,200 × 12% = $864. The reason is the QBI deduction. In this example it’s capped at 20% of taxable income before the QBI deduction, not 20% of QBI, so every dollar the health insurance deduction takes off that income also takes 20 cents off the QBI deduction: $7,200 × 20% = $1,440 ($7,932 → $6,492).
If your plan comes from the Marketplace
When your policy is a Marketplace plan and you get the premium tax credit (PTC), the two benefits chase each other. The deduction lowers your household income, and a lower income can raise your credit. A bigger credit means you paid less out of pocket, and you can only deduct what you paid yourself, so the deduction shrinks, which raises your income again. Round and round.
Publication 974 handles this with two optional methods, a Simplified Calculation Method and an Iterative Calculation Method. It also allows any other method, as long as your deduction plus the PTC (figured with the deduction taken into account) doesn’t exceed the premiums for the plan. In short, you can’t deduct the part of your premium the credit paid for. Tax software normally does the math. If you’re near the 400% cutoff, our 2027 ACA subsidy cliff guide shows how other deductions can bring your income down.
Two changes for 2026 matter here, per the 2026 Form 1040-ES. I cover both, with a worked example, in ACA Marketplace Health Insurance for Freelancers in 2026:
- If your household income is more than 400% of the federal poverty line, you’re no longer eligible for the premium tax credit.
- There’s no longer a limit on how much excess advance credit you have to pay back, at any income level.
Watch out
If your income is hard to predict, the second change matters. If your income ends up higher than you told the Marketplace, you repay the full excess advance credit when you file, so updating your Marketplace estimate during the year matters more than it used to. Once any credit is accounted for, the self-employed health insurance deduction covers the premiums you pay yourself.
If your plan is an HDHP (bronze Marketplace plans now count), you can pair it with an HSA for your out-of-pocket costs. The deduction won’t lower your self-employment tax, but it does reduce the income tax you set aside and prepay each quarter.
What does self-employed health insurance cost?
That depends on the plan, your state, your age and whether you qualify for the premium tax credit, so there’s no single figure. HealthCare.gov explains how the self-employed shop for coverage (HealthCare.gov), and our ACA Marketplace guide for freelancers shows how your income estimate sets the credit. Whatever you end up paying yourself is the amount that feeds line 1 of the form.
