The Self-Employed Health Insurance Deduction: Who Qualifies, the Profit Limit and Form 7206

By Web Asset House Studio · October 29, 2026

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How we wrote this: A summary of the IRS "About Form 7206" page, the Instructions for Form 7206 (2025), Form 7206 itself and Revenue Procedure 2025-32 (2026 long-term care limits), all linked below and checked October 29, 2026. The examples are our own arithmetic. This guide covers the tax rules only. It isn't advice on choosing coverage, and it isn't tax advice for your situation.

If you're self-employed and pay for your own health insurance, the premiums may be deductible "above the line," on Schedule 1 (Form 1040), line 17, without itemizing. Form 7206 is the IRS worksheet-turned-form that figures how much you can take. It replaced a worksheet that used to live in Publication 535.

Who can use it

The Form 7206 instructions say one of these has to be true:

you were self-employed with a net profit on Schedule C or Schedule F,
you were a partner with net earnings from self-employment (Schedule K-1, box 14, code A),
you used one of the optional methods for net earnings on Schedule SE, or
you received wages from an S corporation in which you were a more-than-2% shareholder.

The plan also has to be established under your business. For a Schedule C or F business, the policy can be in the business's name or yours. For partners and more-than-2% S corporation shareholders, it can be in either name, but if you pay the premiums yourself, the partnership or S corporation has to reimburse you and report the premiums as guaranteed payments (Schedule K-1) or wages (Form W-2). Otherwise the plan doesn't count as established under the business.

What premiums count

Medical, dental and vision insurance for you, your spouse and your dependents.
Coverage for your child who was under 27 at the end of the year, even if the child wasn't your dependent.
Qualified long-term care insurance, up to an age-based cap per person (below).
Medicare premiums you voluntarily pay for coverage in your name that's similar to qualifying private insurance.

If your plan came through the Health Insurance Marketplace and you received advance payments of the premium tax credit, or you're claiming the credit, the instructions point you to Publication 974 to work out both together.

The employer-plan rule, month by month

You can't count premiums for any month you were eligible to participate in a subsidized health plan through your employer or your spouse's employer, even if you didn't enroll. The same goes for coverage through the employer of your dependent or your child under 27. Long-term care plans and other plans are tested separately.

So if you leave a job in March and go out on your own, the months you could still have been on the old employer's subsidized plan don't count; the months after do.

The profit limit

You can't deduct more than you earned from the business the plan is established under. Form 7206 works it out:

Line 4: net profit from that business.
Lines 5 to 7: subtract that business's share of the deductible part of self-employment tax.
Line 9: subtract SEP, SIMPLE and qualified plan contributions for that business.
For a more-than-2% S corporation shareholder, the limit is your Medicare wages from that corporation instead (line 11).
Line 14: your deduction is the smaller of your premiums or that limit.

Example (2026 numbers, our arithmetic): a sole proprietor with $6,000 of net profit, no retirement contributions, and $9,000 of premiums. The deductible half of self-employment tax is about $6,000 × 92.35% × 15.3% ÷ 2 ≈ $424, so the limit is about $5,576. That's the deduction. The rest of the premiums can go on Schedule A as medical expenses if you itemize. With $60,000 of profit instead, the limit is about $55,761 and the full $9,000 is deductible. The free self-employment tax calculator shows the deductible half of SE tax for your numbers.

Long-term care caps

For each covered person, count the smaller of what you paid or the cap for their age at year end:

Age at end of year	2025 (Form 7206)	2026 (Rev. Proc. 2025-32)
40 or younger	$480	$500
41 to 50	$900	$930
51 to 60	$1,800	$1,860
61 to 70	$4,810	$4,960
71 or older	$6,020	$6,200

Worksheet or Form 7206?

The instructions say you can generally use the worksheet in the Form 1040 instructions, but you must use Form 7206 if:

you had more than one source of income subject to self-employment tax,
you file Form 2555 (foreign earned income), or
you're including qualified long-term care premiums.

If you have plans under different businesses, use a separate Form 7206 for each.

Three things it doesn't do

It doesn't reduce self-employment tax. You can't subtract it when figuring net earnings for SE tax from the business the plan is under. See self-employment tax explained.
No double counting. Don't include the deducted amount again as a medical expense on Schedule A.
It does reduce QBI. The IRS lists the self-employed health insurance deduction among the items that lower qualified business income; see the QBI deduction for 2026.