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//// Career · Self-Employment Tax

SE Health Insurance Deduction

The most valuable health insurance tax break available to freelancers and 1099 workers. Enter your SE income and premiums to see your deduction cap, total tax savings, and what your coverage actually costs per month.

SE Tax Rate15.3%
QBI Deduction20%
Quarterly DeadlinesApr · Jun · Sep · Jan

Eligibility requirement: You (and your spouse) must not have been eligible for employer-sponsored health insurance for any month you claim this deduction. If you had access to an employer plan, those months are excluded.

Income & Profile

Filing status
Coverage type

Annual Premiums Paid

Deductible Premiums
$5,580
Health + dental + vision + LTC
Allowable Deduction
$5,580
Full amount deductible
Total Tax Savings
$1,507
Federal + state (27.0% combined)
Effective Monthly Cost
$339.45/mo
After tax savings applied

Deduction Summary

AGI (without deduction)

$77,136

Deduction Amount

$5,580

AGI (with deduction)

$71,556

Federal marginal rate

22.0%

SE tax (half-SE deduction)

$5,864

Your net SE income ($83,000) fully covers your premiums. The entire $5,580 is deductible from AGI on Form 1040, Line 17.

Tax Savings Breakdown

Federal (22.0%)$1,228
State (5.0%)$279
Total tax savings$1,507
1

Net self-employment income

grossSEIncome − businessExpenses

$95,000 − $12,000

= $83,000

Health insurance deduction is capped at net SE income (profit).

2

Total deductible premiums

health + dental + vision + LTC (capped)

$4,800 + $600 + $180 + $0

= $5,580

3

Allowable deduction (Form 1040, Line 17)

min(deductiblePremiums, netSEIncome)

min($5,580, $83,000)

= $5,580

Full deduction available — premiums are below net SE income.

4

Federal tax savings

deductionAmount × marginalRate

$5,580 × 22.0%

= $1,228

IRS Publication 535

5

State tax savings

deductionAmount × stateRate

$5,580 × 5.0%

= $279

Most states follow federal AGI for this deduction. Verify your state's conformity.

6

Effective monthly premium cost

(deductiblePremiums − totalTaxSavings) / 12

($5,580 − $1,507) / 12

= $339.45/mo

What you actually pay per month after the government subsidy.

Key insight

Unlike Schedule C deductions, the SE health insurance deduction does NOT reduce your self-employment tax — it only reduces your income tax. It's an above-the-line AGI deduction on Form 1040, not Schedule C. This is the most valuable health insurance tax break available to self-employed individuals.

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