The Best Above-the-Line Deduction for Freelancers

Health insurance is the single largest non-tax expense for most self-employed workers, and the tax code lets you write off 100% of it above-the-line. For 2026, medical, dental, and qualified long-term care premiums you pay for yourself, your spouse, and your dependents are deductible on Schedule 1, Line 17 — no itemizing required. The deduction lands above the standard deduction, so it lowers your AGI even if you do not itemize.

This is one of the few deductions I make sure every freelance client claims, because the dollars are large and the eligibility is broad. A freelancer paying $14,000 a year in ACA premiums saves about $3,360 in federal tax at the 24% bracket — and potentially more at the state level.

How the Deduction Works

The self-employed health insurance deduction is an adjustment to income, not a Schedule C business expense. That distinction matters for two reasons:

  • It reduces income tax but not self-employment tax. The 15.3% SE tax is computed on Schedule C net profit, which is unaffected by this deduction. Only true Schedule C expenses (office, software, mileage) reduce the SE tax base.
  • It is capped at net SE profit. The deduction cannot exceed your net self-employment profit minus half of SE tax and minus any retirement plan contributions. If your business posted a loss, you get no deduction this year.

What Qualifies

Insurance TypeDeductible?Notes
ACA Marketplace premiumsYesThe most common source for freelancers
Private medical/dentalYesFor self, spouse, dependents
Qualified long-term careYesAge-based limits apply (up to $5,960 at 61-70 for 2026)
Medicare Part B and Part DYesFor self-employed filers age 65+
COBRA premiumsYesIf paid out of pocket while self-employed
Spouse's employer-subsidized planNoIf you are eligible to participate, you are disqualified
Pro Tip: If your spouse is also self-employed or has no employer plan available, the family premium often qualifies in full. The disqualification rule only applies if you yourself are eligible to participate in an employer-subsidized plan (including a spouse's). I run this eligibility check with every married freelance couple because it frees up thousands in deductions.

The Premium Tax Credit Interaction

If you buy coverage on the ACA Marketplace and receive a Premium Tax Credit (PTC), the interaction with the self-employed health insurance deduction requires care. The PTC is computed on the premiums after the self-employed deduction. Taking the deduction lowers your AGI, which can actually increase the PTC — but you cannot deduct the portion of the premium already covered by the credit.

In practice, the IRS expects you to allocate premiums between the deductible portion and the credit-paid portion. Most tax software handles this, but I review it manually for every Marketplace client because the ordering rules are easy to break. The safe approach: deduct only the out-of-pocket premium you actually paid after the credit.

A Worked Example

A freelance designer with $90,000 of net Schedule C profit pays $14,400 a year for a family ACA plan (after a $300/month Premium Tax Credit that covers part of the premium). She deducts the $14,400 out-of-pocket portion on Schedule 1. At a 24% marginal rate, that saves $3,456 in federal income tax. Her SE tax is unchanged at roughly $12,700, which you can verify with the Self-Employment Tax Calculator. The deduction also lowers her AGI from $90,000 to $75,600, which may open up other income-based benefits.

Compliance Warning: You are disqualified from the deduction for any month you were eligible to participate in an employer-subsidized health plan — yours, a spouse's, or a former employer's. Even if you did not enroll, mere eligibility kills the deduction for that month. If you had a W-2 job for part of 2026 with employer coverage available, you can only deduct premiums for the months you were not eligible.

The Bottom Line

Deduct 100% of medical, dental, and qualified long-term care premiums on Schedule 1, Line 17 — up to your net SE profit. It reduces income tax and AGI but not the 15.3% SE tax. Coordinate carefully with the Premium Tax Credit so you do not double-dip. Document every premium with statements, and confirm eligible amounts with the Tax Deduction Finder alongside your Self-Employment Tax Calculator projection.