Financial Glossary
Self-Employed Health Insurance Deduction
The self-employed health insurance deduction allows eligible self-employed individuals to deduct premiums paid for medical, dental, and certain long-term care coverage for themselves, their spouse, and dependents. It is generally taken as an adjustment to income rather than an itemized deduction, which means it can reduce adjusted gross income even for taxpayers who take the standard deduction. Eligibility, limits, and the interaction with employer-subsidized coverage are governed by current IRS rules.
Problem & Application
Sole proprietors, single-member LLC owners, partners, and many S corporation shareholders buy their own health coverage and often overlook this deduction or apply it incorrectly. Because the deduction generally cannot exceed the net earnings of the business and is disallowed for any month you could join a spouse's subsidized plan, the details matter. STR operators and other self-employed owners should confirm eligibility against current IRS guidance before claiming it.
In Short
Claimed correctly, the self-employed health insurance deduction is one of the more valuable adjustments available to owner-operators paying for their own coverage.