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If you are self-employed and you pay for your own health insurance, you can probably deduct the premiums. The deduction reduces your adjusted gross income, it is available whether or not you itemize, and plenty of freelancers miss it entirely in their first years of self-employment because nobody hands them a benefits enrollment form.
The rules have sharp edges, though. The deduction is capped, it shuts off in months when you could have joined an employer plan, and it interacts with the marketplace premium tax credit in a way that makes the IRS calculation circular. Here is how it works in practice.
What you can deduct
You can deduct premiums for medical, dental, and qualifying long-term care coverage for yourself, your spouse, and your dependents. The policy has to be established under your business, which for a marketplace plan generally means the coverage is in your name as the self-employed individual buying it. The deduction shows up on Schedule 1, line 17, calculated on Form 7206. It lowers your income tax bill. It does not lower your self-employment tax, because it does not reduce net earnings from self-employment. People expect a 15.3% saving and get a smaller one; the deduction works against income tax only.
The two caps that matter
First cap: your deduction cannot exceed your net profit from the business the plan is established under, minus the deductible half of your self-employment tax and certain retirement contributions. A year with $9,000 of net profit cannot support a $14,000 premium deduction. If you have two businesses, premiums are tied to the business they are established under; you cannot borrow profit from the other one.
Second cap: you get no deduction for any month you were eligible to participate in an employer-sponsored plan, including a plan through your spouse’s job. Eligibility is what counts, not whether you enrolled. If your spouse’s employer offered family coverage you could have joined in March, the deduction stops for March onward even if you stayed on your marketplace plan. Track this month by month if your household’s employment changed during the year. It is the most common reason this deduction gets adjusted.
The circular calculation with premium tax credits
If you bought marketplace coverage and qualify for the premium tax credit, you cannot deduct the same dollars twice. Your deduction is limited to the premium you actually paid after the credit. Here is the tangle the IRS acknowledges in Publication 974: the deduction lowers your AGI, your AGI sets your credit, and your credit sets the net premium you can deduct. Change one number and the other two move.
A plain example shows the mechanics. Suppose your premiums total $10,000 for the year and your final credit is $4,000. You actually paid $6,000, so your deduction ceiling is $6,000, not $10,000. If your advance credit was $4,000 during the year but reconciliation on your return says you owed $2,000 of it back, you actually paid $8,000 and the ceiling rises to $8,000. If the IRS owes you an additional $2,000 of credit, the ceiling falls to $4,000. Tax software runs the iterative calculation for you; your job is to give it accurate premium and Form 1095-A figures. Our guide to estimating income for ACA subsidies helps you avoid a big reconciliation surprise in the first place.
For 2026 this matters more than it did recently. With the enhanced credits gone, households above 400% of the federal poverty level get no credit at all, so every premium dollar is potentially deductible instead. And because the deduction itself lowers AGI, it can pull a household sitting just above that line back under it, which is exactly what the iterative calculation sorts out.
Do not forget the HSA layer
If your marketplace plan is a high-deductible plan that qualifies, HSA contributions are a separate deduction on top of premiums. For 2026 the limits are $4,400 for self-only coverage and $8,750 for family coverage, with an extra $1,000 if you are 55 or older. Our overview of health insurance options for self-employed workers covers plan choices, and the 2026 HSA limits guide has the plan requirements. Premiums first, HSA second, and keep records of both; this deduction is well documented territory for IRS questions, and clean paperwork settles most of them.
