Can I Deduct Medicare Premiums If Self-Employed?

If you’re self-employed and pay for Medicare, you can deduct those premiums as part of the self-employed health insurance deduction under Section 162(l). The IRS treats premiums for every part of Medicare — A, B, C, and D — as qualifying health insurance costs.¹ Deducting Medicare premiums when self-employed is an above-the-line move on Schedule 1, so it reduces your adjusted gross income whether you itemize or take the standard deduction. The dollars add up quickly: the standard Part B premium alone is $202.90 per month in 2026, before adding Part D, Medigap, or Medicare Advantage.²

Which Medicare Premiums Count

Every Medicare premium you pay out of pocket qualifies. That covers Part B, Part C (Medicare Advantage), Part D prescription drug coverage, and any Medigap supplemental policy. It doesn’t matter whether the premium comes out of your bank account or is withheld from your Social Security check.¹ Most people pay nothing for Part A, but if you owe a Part A premium because you didn’t hit 40 quarters of Medicare-taxed work, that premium counts too.²

You can also include premiums you pay for your spouse’s Medicare, for your dependents, and for a child under age 27 at year-end even if that child isn’t your dependent.³

Who Counts as Self-Employed for This Deduction

You need net self-employment income from one of these arrangements:

Sole proprietor or single-member LLC with net profit on Schedule C or Schedule F.
Partner with net earnings from self-employment on Schedule K-1 (Form 1065), box 14, code A.
S-corporation shareholder owning more than 2%, with wages reported on a W-2 from that S-corp.

The S-Corp Shareholder Wrinkle

If you own more than 2% of an S-corporation, there’s an extra step that people miss. The S-corp has to either pay your Medicare premiums directly or reimburse you, and the premium amount must be reported as wages on your W-2. Those wages land in Box 1 but not in Boxes 3 and 5, so they’re subject to income tax but not FICA or FUTA.⁴

Pay premiums personally with no reimbursement and no W-2 inclusion, and you lose the above-the-line deduction entirely.⁵ The fix takes some coordination with your payroll: pay the premiums, submit proof to the S-corp, get reimbursed in the same tax year, and confirm the amount appears on your W-2. The S-corp paying the insurer directly and reporting the premiums as compensation works too.⁴

The Subsidized Employer Plan Disqualifier

The biggest thing that kills this deduction has nothing to do with Medicare. For any month you were eligible to participate in a subsidized health plan through any employer, you cannot take the deduction for that month. Enrollment doesn’t matter. Eligibility does.⁶

The rule reaches wider than just your own jobs. It applies to plans offered by your spouse’s employer, by an employer of your dependent, or by an employer of a child under 27.³ If your spouse had access to a subsidized plan at work through June and then left that job, you can’t deduct Medicare premiums for January through June, but July through December are back on the table. The test runs month by month, so keep records of exactly when employer plan eligibility started and stopped.

How Much You Can Deduct

The deduction is capped at the net earnings of the business that established the health plan. If Schedule C shows $6,000 in net profit and you paid $8,000 in Medicare premiums, your deduction is $6,000. A business with a net loss gets zero.⁷⁶

Running more than one business? Each business with its own health plan needs its own Form 7206, and the earnings cap runs separately for each. You can’t cover premiums tied to one business with profits from another.⁶

Also subtract any premiums you paid with tax-free distributions from a Health Savings Account. The IRS doesn’t allow both tax benefits on the same dollar.⁸

Where the Deduction Goes on Your Return

Calculate the deduction on Form 7206, which replaced the old worksheet from Publication 535. The result flows to Schedule 1 (Form 1040), line 17.⁹ Because it lives on Schedule 1, it lowers your AGI whether or not you itemize.

Many taxpayers can use the simpler worksheet in the Form 1040 instructions instead. You must use Form 7206 if you have more than one source of self-employment income, if you file Form 2555 for foreign earned income, or if you’re including qualified long-term care premiums in the deduction.⁶

What Happens to Premiums Above the Cap

Premiums that exceed the earnings cap aren’t gone. If you itemize, they can go on Schedule A as medical expenses, though Schedule A only lets you deduct medical costs above 7.5% of your AGI.¹⁰ For most people that threshold is high, but it’s a fallback when business income was too small to absorb the full premium bill.

Only the excess belongs on Schedule A. Don’t include any amount you already deducted on Schedule 1.⁶

It Does Not Reduce Self-Employment Tax

This trips up a lot of people. The deduction lowers your income tax. It doesn’t touch your self-employment tax. When you calculate net earnings on Schedule SE, you cannot subtract the deducted premiums.⁶ The statute has excluded the deduction from SE tax calculations for every tax year after 2010.³

SE tax is 15.3% on most net earnings and is often the largest single tax a self-employed person owes. If you factor the premium deduction into your quarterly estimates for SE tax, you’ll come up short in April.

A Secondary Benefit: Lower Medicare Surcharges Later

Medicare uses your modified adjusted gross income from two years earlier to set income-related monthly adjustment amounts, the IRMAA surcharges added to your Part B and Part D premiums. In 2026, the first bracket starts above $109,000 for single filers and $218,000 for joint filers, and the surcharges rise steeply from there. At the top bracket, Part B alone runs $689.90 per month.²

Because this deduction reduces AGI, it can drop you below an IRMAA threshold and cut future premium surcharges. If your income is hovering near a bracket line, the deduction pays off twice: on this year’s income tax and on next year’s Medicare bill.

1
Internal Revenue Service. Memorandum – Deductibility of Medicare Premiums Under Code Section 162(l)
2
Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
3
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
4
Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues
5
Internal Revenue Service. Special Rules for Health Insurance Costs of 2-Percent Shareholder-Employees
6
Internal Revenue Service. Instructions for Form 7206 (2025)
7
Internal Revenue Service. Form 7206 – Self-Employed Health Insurance Deduction
8
Internal Revenue Service. Publication 969 (2025) – Health Savings Accounts and Other Tax-Favored Health Plans
9
Internal Revenue Service. 2025 Schedule 1 (Form 1040)
10
Internal Revenue Service. Publication 502 (2025) – Medical and Dental Expenses