Can Disability Premiums Be Deducted as Self-Employed Health Insurance?

If she's covered by your spouse's policy, there's no self-employment deduction.

If she's covered by your spouse's policy, there's no self-employment deduction.

Anyone can write off insurance premiums as an itemized deduction, but the self-employed can do it as a business expense. If you qualify, you can deduct the cost of your own insurance as well as coverage you buy for your spouse, dependents or adult children 26 years or younger. You take the deduction on your Form 1040, rather than writing it off as a business expense.

Long-Term Care

If your regular insurance includes some disability coverage, you can write off the premiums. You can also deduct the cost of long-term care insurance, with limits on how much you can deduct each year: for someone under 40, for instance, the maximum write-off is $350. The policy must cover treatment and care for a chronically ill individual, defined as someone who can't perform at least two of the six basic functions of living, such as bathing, eating or general mobility. It can also cover constant supervision for, say, an Alzheimer's patient.

Who Pays

Even if your long-term care policy qualifies, there are other rules you have to meet to take the deduction. You can't use the deduction for insurance you get through a day job, or for coverage you get through your spouse's employer. You have to buy it yourself, either in your own name or in the name of your business. In any month when your spouse's insurance could have covered you, you can't take the write-off for your own policy.

Taking the Write-Off

The IRS says you have to be either a sole proprietor, a partner or one of the owners of an S corporation to write off premiums. To figure your maximum allowed deduction, you take your business's profit and adjust it, for example by subtracting any write-offs for self-employment taxes. Then add your regular insurance premiums and the eligible long-term insurance deduction together. You can take a write-off in the amount of your adjusted profits or your total premium cost, whichever is smaller.

Backup Plan

If you can't write off all your expenses, you can take any leftover premium costs as a deductible medical expense on Schedule A. Add them together with any other medical write-offs and subtract 10 percent of your adjusted gross income from the total. Whatever remains of your expenses is deductible . One of the advantages of the self-employment deduction is that it's not itemized -- you can take it on Form 1040 even if you use the standard deduction.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

Photo Credits

  • Hemera Technologies/ Images