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Self-Employed Health Care Insurance Deductions and Benefits

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What You Need to Know

If you’re self-employed (sole proprietor/LLC, partner, or if you own your S Corp ) your/your family’s health care insurance premiums can be deducted


Michail Petrov/Adobe Stock
Michail Petrov/Adobe Stock

Below, Samir explains how to maximize your deduction while staying compliant.

Eligibility for the Deduction - you must meet specific requirements based on how health insurance premiums are paid and reported. Here's a breakdown:

  1. S Corporation you may deduct health insurance premiums if:

    • The S corporation pays the premiums directly for a policy covering you (and your family) during the current tax year, OR

    • You pay the premiums personally and are reimbursed by the S corporation within the same tax year., AND

    • Important: The premium amounts must be included in your gross income as wages on Form W-2. Otherwise, the deduction is not allowed.

Deduction Limitations: The deduction is limited to the smaller of:

o   The health insurance premiums paid, or

o   Your Medicare wages (as shown in Box 5 of your Form W-2).

  1. Partners in a Partnership

    Health insurance policies can be:

    • In the name of the partnership, with the premiums paid directly by the partnership, or

    • In the name of the partner, with the partner paying the premiums. In this case, the partnership must reimburse the partner and report the premium amounts as guaranteed payments on Schedule K-1 (Form 1065).


Premium Tax Credit (PTC)

If you purchase health insurance through Covered California or another government marketplace and qualify for the Premium Tax Credit (PTC), you can only deduct the portion of your premiums that EXCEEDS your PTC amount.


Key Takeaways

  • Either Company/Partnership can pay directly or you can pay and be reimbursed

  • The value of the coverage must appear on your individual return as wages for S Corps or Guaranteed Payments for Partnerships: 

  • Know your deduction limit: The deduction cannot exceed your Medicare wages or net profit from your business.

  • Coordinate with Tax Credits: If you’re using the Premium Tax Credit, adjust your deduction accordingly.


There are other health insurance-related benefits, for example if you employ people who are not owners. You’ll received an ADDITIONAL tax credit for providing this benefit to your employees?

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