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How to Deduct Health Insurance Premiums When You’re Self-Employed

Lively · March 7, 2019 · 3 min read


Few things beat the thrill of being your own boss. You can make your own hours, pick your clients, and build a dream business. But self-employment is far from easy. Days off, taxes, and insurance chip away at your profits. These things may be a burden if your income is low. Luckily, the government offers some breaks — including a deduction for health insurance. Here’s what you need to know.

When you can deduct premiums: rules for your business

There is nothing cheap about health insurance — especially when you pay for premiums on your own. The government knows how expensive it is and offers some relief. If you are paying for health or dental insurance for yourself, spouse or kids, the premiums may be deductible. It’s not allowed in all cases, though. These are the rules for your business:

  • Your business made a profit for the year. You need to have a profit after totaling your income and expenses.

  • You made money as a partner of a business. This may be reported on Schedule K-1.

  • You earned wages as a stockholder. This may apply if you received a W-2 and own more than 2 percent of an S corporation.

When you can deduct premiums: rules for your health insurance plan

On top of the rules for your business, there are guidelines for your insurance plan too. You need to know these restrictions before taking the deduction.

  • The policy is in your name or your business’s name. This applies if you are self-employed and file Schedule C, C-EZ, or F.

  • The policy is in your name or your partner’s name. If your business is a partnership, either partner can pay the premiums. But if you pay them, the business needs to reimburse you. The premiums will be income on your Schedule K-1.

  • The policy is in your name or the S corporation’s name. These rules are similar to a partnership. Either you or the S corporation can pay the premiums. If you pay them, the S corporation needs to reimburse you. The premiums will be income on your Form W-2.

There is one more rule that may be easy to miss: If you were eligible to join your spouse or dependents’ health insurance plans — but chose not to — you can’t deduct your premiums. This rule applies for the entire period you were eligible for the other health insurance plan.

Where to deduct health insurance premiums

You may have noticed some major changes to Form 1040. The form may be smaller, but you need a bunch of different schedules to complete each section. This includes your self-employed health insurance premiums deduction. Here are step-by-step instructions. 

Start by filling out Schedule 1. This form is for additional income and adjustments to income. Line 29 — on the second half of the form — is where your total health insurance premiums go. Once Schedule 1 is complete, the total goes on line 7 on the second page of Form 1040.

Major savings for small business owners

As a small business owner, you know the value of every dollar your company earns. Writing off premiums may reduce your tax bill — leaving more cash for other priorities. If you’re concerned by the rules, don’t hesitate to speak with a professional. Doing it right the first time is worth the added expense.

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Lively is the modern HSA experience built for—and by—those seeking stability in the ever-shifting healthcare landscape. By harnessing modern innovation and deep industry expertise, Lively is committed to bridging today’s savings with tomorrow’s unknowns. Unlike traditional institutions hindered by bureaucracy, Lively’s commitment extends beyond initial set up to providing dedicated, ongoing support and education for every step. So each HSA can reach its maximum potential with minimal headache.

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A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.

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Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.



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