Individual health insurance policy and stethoscope.


As a small business owner, you have to pay for everything, including your own health insurance. You do not have the benefits of working for a corporation where health insurance, retirement savings, or other fringe benefits are provided free of charge. However, there are perks to being your own boss. You can set your own hours, you can decide what type of work to do, and you can even take advantage of several IRS tax breaks. These tax breaks include the Self-Employed Health Insurance Deductions.

Small Business Health Insurance Premium Deductions

If you own a small business, then your business can deduct the cost of your health insurance premiums as a business expense. Your business must either pay the premiums or reimburse you for the cost of the premiums when the policy is opened outside the company and payments are made from your personal accounts. The default tax treatment for these health insurance premiums is to be taxed as a fringe benefit. A fringe benefit must be included as income on your personal income tax return. This means your business has deducted the cost of the health insurance premium as an expense, and now you have picked up the expense as income on your individual income tax return. This looks like a wash until the Self-Employed Health Insurance Deduction is taken into consideration.

Taxable Fringe Benefits

The Self-Employed Health Insurance Deduction, as described by IRS Section 162, allows small business owners to deduct the cost of their health insurance premiums on their income tax returns to reduce their taxable income directly. The taxable fringe benefit is now able to be deducted again on your return, effectively allowing you to completely deduct the cost of health insurance premiums for you, your spouse, and your dependents. As long as the business offers health insurance to non-owner employees, then the health insurance is free from Social Security and Medicare taxes, as well. If your income from the business runs at a loss, you will have to deduct the premiums paid as a Schedule A itemized deduction.

The Self-Employed Health Insurance Deduction is just one benefit that small business owners are entitled to under our current tax laws. Contact one of our tax professionals at Abacus CPAs to keep up to date on this small business deduction benefit and more. This will allow you to keep more money in your business for the growth of your company. We can be reached by phone at 417-823-7171 or online at

If you are a small business owner and have questions about the Self-Employed Health Insurance Deduction, then this blog is just for you! Contact us today for more information.

Sam Shafer is an Advisor at Abacus CPAs, LLC.  Sam specializes in business and income tax preparation and has five years of experience in public accounting.  He is passionate about providing the best tax advice to help people achieve their business and life goals. Sam is terrific at juggling rapidly changing priorities, which makes him flexible with a practical bend.

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