Schedule 1 Line 26: Self-Employed Health Insurance Deduction

If you work for yourself and pay your own health coverage, the self-employed health insurance deduction lets you subtract those premiums directly from your income on Schedule 1 (Form 1040), Line 17. It’s an above-the-line adjustment, so it reduces your adjusted gross income before you decide whether to itemize, and a lower AGI can protect other tax breaks that phase out at higher incomes. The deduction covers medical, dental, vision, and qualifying long-term care premiums for you, your spouse, your dependents, and your children who were under age 27 at year-end.

Who Can Claim It

You qualify if you had self-employment income during the year in one of these forms:

Sole proprietor reporting profit on Schedule C or Schedule F
Partner with net self-employment earnings on Schedule K-1 (Form 1065), Box 14, Code A
LLC member taxed as a sole proprietor or partner
S-corporation shareholder who owns more than 2% of the stock and receives W-2 wages from the corporation

Nonresident aliens filing Form 1040-NR can claim it, but only against income effectively connected with a U.S. trade or business.¹

The plan has to be established under the business that produced the income. For a sole proprietor, having the business and paying the premiums is enough. A partnership pays the partner’s premiums and reports them as guaranteed payments on the K-1. For a more-than-2% S-corp shareholder, the corporation pays the premiums and adds them to the shareholder’s W-2 as wages; the shareholder then claims the deduction on Schedule 1 to offset that inclusion.²

The business also has to show a net profit for the year. A loss year means the deduction is zero, no matter what you paid in premiums.³

You can include a child who was under age 27 at the end of the tax year even if that child is not your dependent. Son, daughter, stepchild, adopted child, and foster child all count. If that child had access to a subsidized plan through their own employer and you were eligible for it, though, premiums for those months are out.²

Which Premiums Qualify

Medical, dental, and vision premiums for you, your spouse, dependents, and under-27 children are all eligible. High-deductible health plans paired with an HSA qualify. So do Medicare Parts A, B, C, and D, as long as you’re paying them yourself or through the business.²

Long-Term Care Insurance Age Caps

Qualified long-term care premiums count too, but only up to an age-based limit the IRS updates annually. For 2026, those caps are:⁴

Age 40 or younger: $500
Age 41 to 50: $930
Age 51 to 60: $1,860
Age 61 to 70: $4,960
Over age 70: $6,200

Anything you paid above the cap for your age bracket simply drops out of the calculation. Age is fixed as of December 31.

What Doesn’t Count

Premiums you already deducted as itemized medical expenses on Schedule A cannot be used here; the same dollar can’t reduce your tax twice. Premiums paid with tax-free HSA distributions are also excluded. Supplemental policies such as critical illness, hospital indemnity, and accidental death coverage are not listed as qualifying premiums in the Form 7206 instructions, so they should be left out.²

How Much You Can Deduct

The deduction cannot exceed the net earnings from the specific business that sponsors the plan. This earned-income cap comes from Internal Revenue Code Section 162(l).⁵

For a sole proprietor, that figure is Schedule C or Schedule F profit minus the deductible half of self-employment tax from Schedule SE. If your Schedule C shows $60,000 in profit and the deductible portion of SE tax is $4,237, the ceiling is $55,763. Premiums of $9,000 would be fully deductible because they sit well below that number.³

For a more-than-2% S-corp shareholder, the ceiling is the W-2 wages from the S corporation, which already include the premiums added by the company. Partners use their net self-employment earnings from the partnership.

If you run more than one business, profits don’t pool. Only the earnings of the business that sponsors the plan count toward the cap. Separate plans under separate businesses require a separate Form 7206 for each.⁶

The Employer-Plan Disqualifier

The biggest reason people lose this deduction is access to a subsidized employer plan. You cannot claim the deduction for any month in which you were eligible to participate in a subsidized health plan through any employer, whether you actually enrolled or not. Eligibility is the test, and it’s applied month by month.²

The rule extends to your spouse’s employer. If your spouse’s job offers a subsidized family plan you could join, you lose the deduction for every month that coverage was available. A plan is “subsidized” whenever the employer pays any part of the premium. A plan where employees pay 100% with no employer contribution is not subsidized and doesn’t disqualify you.

The same restriction applies to plans offered through the employer of a dependent or an under-27 child. Eligibility for any part of a month kills the deduction for the whole month. Starting a new benefits-eligible job on March 15 costs you March in full, not just the second half.²

COBRA

COBRA continuation coverage generally does not count as subsidized, because the former employee pays the full unsubsidized premium plus up to a 2% administrative fee. If a former employer is voluntarily paying part of your COBRA premium, though, those months would be treated as subsidized.

Keep written confirmation from each employer or plan administrator about whether subsidized coverage was available and for which months. If you aren’t sure whether a spouse’s plan counts as subsidized, ask HR for the summary plan description.

Marketplace Coverage and the Premium Tax Credit

If you bought coverage through the Health Insurance Marketplace and received advance premium tax credits or plan to claim the Premium Tax Credit on your return, the math turns circular. The deduction lowers your AGI, which can raise your Premium Tax Credit, which lowers the net premium you actually paid, which lowers the deduction. Each figure depends on the other.

Revenue Procedure 2014-41 sets out an iterative method: compute the deduction using the full premium, compute the credit from the resulting AGI, recompute the deduction after subtracting the credit, and repeat until the changes between rounds are less than $1.⁷

Publication 974 has the detailed worksheets, and it splits premiums into “specified premiums” (Marketplace plans tied to your business) and “nonspecified premiums” (non-Marketplace plans under your business). If advance credits were paid on your behalf, you must reconcile them on Form 8962 and use Publication 974 rather than the standard Form 7206 worksheet alone.⁸

Tax software runs the iteration for you. Doing it by hand usually takes several passes before the numbers settle.

It Does Not Reduce Self-Employment Tax

One thing this deduction won’t do: cut your self-employment tax. It reduces federal, state, and local income tax only. The IRS is clear that you cannot subtract the self-employed health insurance deduction when figuring net earnings for self-employment tax purposes.² Social Security and Medicare tax still applies to the same net self-employment earnings you started with.

Filing the Deduction

Form 7206 is the IRS form for calculating the deduction; it replaced the worksheet that used to live in Publication 535. For simpler returns, you can use the worksheet in the Form 1040 instructions instead. Form 7206 is required if any of these apply:²

You had more than one source of income subject to self-employment tax.
You file Form 2555 (Foreign Earned Income).
You’re including long-term care insurance premiums.

The form takes you through entering premiums, entering net profit or W-2 wages, and applying the earned-income cap. The final number goes to Schedule 1 (Form 1040), Part II, Line 17, reduced for any months when subsidized employer coverage was available.⁶

Hang on to premium statements, proof of payment, and any documentation of employer-plan eligibility for at least three years from the date you file. You don’t submit them with the return, but the IRS can request them if the return is examined, and the general statute of limitations runs three years from filing.⁹

1
Internal Revenue Service. Nonresident — Figuring Your Tax
2
Internal Revenue Service. Instructions for Form 7206 (2025)
3
Internal Revenue Service. Case Study 1 – Self-Employed Health Insurance Deduction
4
Internal Revenue Service. Internal Revenue Bulletin 2025-45
5
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
6
Internal Revenue Service. 2025 Instructions for Form 7206
7
Internal Revenue Service. Revenue Procedure 2014-41
8
Internal Revenue Service. Publication 974 – Premium Tax Credit
9
Internal Revenue Service. How Long Should I Keep Records