Self-Employed Health Insurance Deduction for 2025 Tax Filing Season
Hey all, I'm really hoping someone can help me understand the self-employed health insurance deduction. I started my graphic design freelance business last year and I'm paying nearly $550/month for a marketplace health plan. My CPA mentioned I could deduct my premiums but didn't really explain how it works. Do I just claim it on Schedule C with my other business expenses? Or is it somewhere else on the tax forms? My business made around $58,000 last year but I'm not sure if there are income limits or other requirements. Also, can I deduct dental and vision insurance too or just health? Sorry for all the questions but this is my first year dealing with this and I want to make sure I'm doing it right!
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Eve Freeman
The self-employed health insurance deduction is actually pretty valuable, but it's not claimed on Schedule C like your other business expenses. It's a special "above-the-line" deduction on Schedule 1 of your Form 1040. Here's what you need to know: You can deduct 100% of your health insurance premiums (including dental and vision) for yourself, your spouse, and your dependents, up to the amount of your net profit from self-employment. The key is that you can't deduct more than your business actually earned, and you can't claim it if you're eligible for coverage through your spouse's employer plan. The big requirement is that your business must show a profit on Schedule C - which sounds like you've got covered with your $58K in earnings. When you fill out your taxes, you'll calculate your net profit on Schedule C, then claim the health insurance deduction on Schedule 1, Line 17.
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Clarissa Flair
•Is it true that you have to pay self-employment tax on the income before you take the health insurance deduction? And does the marketplace premium tax credit affect this at all? I get a partial subsidy.
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Eve Freeman
•Yes, you have to pay self-employment tax on your full net business income before taking the health insurance deduction. The self-employment tax calculation happens before this deduction is applied. Regarding marketplace subsidies (Premium Tax Credits), it definitely affects things. You can only deduct the premiums you actually paid out-of-pocket. So if your monthly premium is $550 but you receive a $200 subsidy, you'd only deduct the $350 you actually paid. Make sure you're looking at Form 1095-A from the marketplace which shows your actual premium costs versus the subsidy amount.
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Caden Turner
I was in the exact same situation last year - freelancer with marketplace insurance and totally confused about the deduction. I eventually used https://taxr.ai to help me figure it out. Their system analyzed my 1095-A and Schedule C, then explained exactly how to maximize the self-employed health insurance deduction while accounting for my premium tax credits. What was most helpful is that they showed me where specifically to enter everything - not just saying "put it on Schedule 1" but actually walking through the form entry process step by step. They even caught that I was eligible to deduct my HSA contributions separately, which I had no idea about!
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McKenzie Shade
•So this isn't just another tax calculator? How does it actually help with self-employed deductions specifically? I've been using TurboSelf-Employed but still feel like I'm missing things.
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Harmony Love
•Can it help with figuring out if I qualify? My situation is complicated - I do gig work, have a part-time W-2 job that doesn't offer benefits, and my spouse has employer insurance that doesn't cover me. Not sure if I can take the deduction or not.
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Caden Turner
•It's definitely not just a calculator. It actually looks at your specific tax documents and gives personalized guidance. For self-employed deductions, it analyzes your Schedule C and identifies potential missing deductions based on your business type and expenses. Much more tailored than the generic guidance in TurboSelf-Employed. For your complicated situation with multiple income sources, it would help determine eligibility. It specifically handles mixed income situations like yours and can determine if you qualify for the self-employed health insurance deduction when you have both W-2 and self-employment income. The system is designed to handle these "edge cases" that most tax software misses.
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Harmony Love
OMG I had to come back and say THANK YOU for recommending taxr.ai! My situation with the mixed W-2 and gig work was super confusing, but the analysis showed me exactly how much of my health insurance I could deduct. Turns out I could take about 70% of my premiums as a deduction based on the portion of my income that came from self-employment. The regular tax software I was using completely missed this and would have cost me over $800 in deductions! Plus it explained the coordination with my premium tax credit in a way that actually made sense. Seriously saved me so much money and confusion.
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Rudy Cenizo
Just want to add that if you're having trouble getting answers from the IRS about self-employment deductions (which I definitely was), I used https://claimyr.com to actually get through to an IRS agent. There's a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. I had a specific question about how to handle my health insurance premiums when I switched plans mid-year and was getting contradictory advice online. Claimyr got me connected to an IRS rep in about 20 minutes instead of the 3+ hours I spent on hold before. The agent confirmed exactly how to handle the deduction with multiple 1095-A forms.
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Natalie Khan
•Wait how does this actually work? Does it just call the IRS for you or something? Seems weird to have a service just to make phone calls.
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Daryl Bright
•Yeah right. Nothing gets you through to the IRS these days. I've tried calling like 8 times about my self-employment questions and either get disconnected or told the wait is too long. If this actually works I'll eat my hat.
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Rudy Cenizo
•It basically holds your place in the IRS phone queue so you don't have to sit there listening to the hold music for hours. They have some tech that navigates the phone tree and waits on hold, then calls you when they get a real person on the line. It's not just making phone calls - it's specifically designed to deal with the IRS's notoriously difficult phone system. I was skeptical too, but when you've spent literal hours trying to get an answer about your self-employment deductions, paying to save that time is worth it. They really do call you when they have an actual IRS agent on the line - no more getting disconnected after waiting forever.
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Daryl Bright
OK I need to publicly admit I was wrong. I tried Claimyr after posting that skeptical comment, and I actually got through to someone at the IRS in like 25 minutes. The agent helped me understand how to properly calculate my self-employed health insurance deduction when my income fluctuates month to month (I'm a seasonal contractor). Turns out I've been doing it wrong for TWO YEARS and probably could have gotten bigger refunds. Now I'm going to file amended returns. It's stupid that we need a service just to talk to the freaking IRS, but it definitely works.
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Sienna Gomez
For the record, I've been self-employed for 7 years and here's what I've learned about the health insurance deduction: 1) It's EASY to mess up and costs you money when you do 2) Tax software usually gets it wrong if your situation is even slightly complicated 3) If you have marketplace coverage AND self-employment income, double-check everything Make sure you're also looking at your state tax return. Some states handle this deduction differently than federal. In California for example, the deduction works differently than on federal returns.
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Val Rossi
•Thanks for this! Do you know if there are any special rules if you have family members on your policy? My husband and kids are on my marketplace plan too.
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Sienna Gomez
•Yes, you can absolutely include premiums for your husband and kids on your policy. The self-employed health insurance deduction covers premiums for yourself, your spouse, and your dependents. Just make sure you're the one paying the premiums through your business (meaning the income that covers the premium comes from your self-employment). The one thing to watch for is if your husband has access to employer coverage where he could add you and the kids. If that's available, even if you don't take it, it could potentially affect your ability to claim the full deduction. The IRS looks at whether other coverage was "available" to you, not just whether you took it.
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Kirsuktow DarkBlade
Has anyone else noticed that the self-employed health insurance deduction calculation is messed up in tax apps? I tried three different ones and they all gave different answers for the exact same numbers. Ended up having to calculate it by hand using the worksheet in the 1040 instructions.
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Abigail bergen
•Yes!! This happened to me too. TaxCut calculated a lower deduction than TurboTax, and when I checked my numbers manually, both were wrong! The issue was with how they handled my marketplace premium tax credit. Such a headache.
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Freya Thomsen
This is such a helpful thread! I'm in a similar boat as a freelance photographer and had no idea the health insurance deduction was separate from Schedule C expenses. One thing I'm wondering about - if I started my business partway through 2024 and was on COBRA for the first few months before switching to marketplace coverage, can I deduct both the COBRA premiums and the marketplace premiums? Or do I need to prorate based on when my business was actually operational? My business didn't really start generating income until March, but I was paying COBRA from January.
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Tate Jensen
•Great question! You can only deduct health insurance premiums for the months when you had net earnings from self-employment. Since your business didn't generate income until March, you wouldn't be able to deduct the COBRA premiums from January and February - those months don't qualify because there was no self-employment income to support the deduction. For March onward, you can deduct both the remaining COBRA premiums (if any) and your marketplace premiums, but only up to the amount of your net profit from self-employment for the year. So if your business made $30K from March-December, your total deductible health insurance premiums can't exceed $30K. The key rule is that you need self-employment income in the same tax year to claim the deduction. The IRS doesn't prorate based on when you started the business - it's all about having the income to support the deduction.
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