This one flies under the radar for a lot of young freelancers, and it’s genuinely worth knowing.
When you work a regular job, your employer usually covers part of your health insurance and handles the tax stuff behind the scenes. But when you’re self-employed — freelancing, contracting, running your own thing — you’re paying those premiums yourself, out of pocket. That stings. The good news is the IRS actually gives you a break for it.
Self-employed people can deduct 100% of what they pay in health insurance premiums directly from their income. That includes medical, dental, and vision coverage. And here’s the part that really matters: according to the IRS, this is an adjustment to income — not an itemized deduction. That’s a big deal. Most tax deductions only kick in if you go through the whole process of itemizing, which takes more work and doesn’t make sense for everyone. This one doesn’t require that. You just claim it and it lowers your taxable income, period.
The deduction can cover more than just yourself, too. It applies to your spouse, your dependents, and even your kids who are under age 27 at the end of the tax year — even if they’re not technically your dependent on your tax return.
You claim this using IRS Form 7206, which feeds into Schedule 1 on your Form 1040. If for some reason you can’t deduct all of it there — say the deduction gets limited — whatever’s left can still be included as a medical expense on Schedule A if you do itemize. So you’re not losing that money either way.
One thing to keep in mind: there are limits. You generally can’t deduct more than your net self-employment income for the year. And if you were eligible to get coverage through a spouse’s employer plan, that can affect your eligibility for this deduction. The rules have some nuance to them.
But the core fact stands — if you’re freelancing and paying for your own health coverage, that expense is working for you at tax time. A lot of people in that situation don’t realize it and just leave money on the table.