Can self-employed individuals deduct health insurance?

Yes, self-employed individuals *can* often deduct health insurance premiums, but it's not always straightforward. Here's a breakdown:

* **Self-Employment Health Insurance Deduction:** This allows you to deduct health insurance premiums paid for yourself, your spouse, and your dependents.

* **Requirements to Qualify:**

* You **must be self-employed** (1099 income, sole proprietor, partner in a partnership, etc.). A W-2 employee *cannot* take this deduction.

* You **cannot be eligible to participate in an employer-sponsored health plan** (either your own or your spouse’s). If you *can* participate even if you choose not to, you generally can't take the deduction.

* The plan must be a genuine health insurance policy – it *doesn't* include things like long-term care insurance or premiums paid with an HSA.

* **How it Works - Above-the-Line Deduction:** The deduction is taken "above-the-line" on Schedule 1 (Form 1040). This means you can take it even if you don't itemize deductions.

* **Deduction Limit:** The deduction is limited to your net profit from self-employment. You can only deduct what you *earned*.

* **Example:** If your net profit is $40,000 and your health insurance premiums were $6,000, you can deduct $6,000. However, if your health insurance premiums were $50,000, you can only deduct $40,000 – the amount of your net profit.

* **Calculating Deduction:** You *don't* deduct the portion of premiums covered by any other source (e.g., a settlement for medical expenses).

* **Reporting:** Report the deduction on Schedule 1 (Form 1040), line 16.

⚠️ Disclaimer: This is for educational purposes only. Always consult a licensed CPA for personalized advice.