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10519: Self-Employment Health Insurance Deduction


1040 Individual

Where can I enter health insurance expenses for a self-employed taxpayer? How is the deduction calculated? 
 
There are several options for data entry depending on the situation and coverage that the taxpayer has:
  • Screen C or F, in the field Family health coverage. See below for more information.
  • Screen SEHI, line 1. This is an override field. An entry here may also require an entry on line 4 (net profit) for correct results.
    • An override for special situations involving the SEHID and the Premium Tax Credit is available at the bottom of this screen (starting in Drake23). You may need to use this override when Return Note 390, 391, or 460 appears.
    • Long-term care health insurance premiums for self-employed taxpayers are entered on line 2, Qualified long-term care amount.
  • Screen 4This is an adjustment field in Drake22 and prior. Starting with Drake23, the SEHID line on screen 4 links back to the SEHI screen instead.

After the SEHI premiums have been entered into the return, Form 7206 is generated* in View/Print mode to explain the calculation of the amount that appears on Form 1040, Schedule 1.

Note: ​If there is both a SEHI deduction on Schedule C or F and Marketplace insurance being reported on screen 95A, see the section below for additional factors that may affect the calculation. 

For a demonstration, watch the video Self-Employed Health Insurance Deduction. See Publication 535 for additional information.

Some taxpayers may be eligible for both a self-employed health insurance deduction and the PTC for the same premiums. See Publication 974 for more details.


C Screen > "Family health coverage" Field

The amount from the Family health coverage field can flow to the Schedule 1, line 16, or to the Schedule A, line 1, or to both. The amount that flows to Schedule A does not appear on any worksheet or overflow statement related to Schedule A, but it is included in the total for line 1 that appears in View/Print.

If there is not enough profit on the Schedule C to cover at least part of the Family health coverage:

  • The premium flows directly to Schedule A, line 1.
  • The line "Self-employed health insurance deduction" on Schedule 1 remains blank.

If the taxpayer made a profit on the Schedule C to cover part of the Family health coverage:

  • Data flows to the "Self-employed health insurance deduction" line of Schedule 1.
  • Form 7206* explains the calculation of the amount that appears on Schedule 1.

The difference of the Schedule 1 "Self-employed health insurance deduction" and insurance premium on Schedule C flows to Schedule A, line 1. 

For more information on the treatment of self-employed health insurance premiums, see Publication 535, Business Expenses, Chapter 6.

Form 1095-A and the Self-Employed Health Insurance Deduction

If the taxpayer had coverage through the Marketplace, you must complete screen 95A. Then choose one of the following options:

Let the software figure the SEHI deduction

  • Enter the total annual premium paid by both the taxpayer and the Marketplace (not just the taxpayer's share of the premium) on the Family health coverage field on screen C or F.
    • This is the Annual Totals amount from line 33, column A, of the taxpayer's 1095-A, or the sum of the premiums shown in column A plus the cost of any additional health insurance policy not reported on Form 1095-A. The software nets the total annual Premium Tax Credit and determines the tentative deduction that flows to Form 7206*.

    Calculation of the SEHI deduction from Form 8962 is a circular iterative process. The SEHI deduction reduces the MAGI and may affect the annual Premium Tax Credit. (See the Instructions for Form 8962.) If the credit changes, it affects the SEHI deduction and the MAGI, and so on. See Rev. Proc. 2014-41. This iterative calculation is handled by the software, and Return Note 390 is produced as a result.

    • If only part of the household insurance entered on screen 95A qualifies for the SEHI deduction, you must manually figure the deduction and use the override available at the bottom of the SEHI screen (or screen 4 in Drake22 and prior).

      Return Note 388 is produced if you enter an SEHI amount on screen CF, or SEHI that is less than the total premiums on Form 8962.

    • If none of the household insurance entered on screen 95A qualifies for the SEHI deduction, select the screen 95A option The Marketplace premiums on Form 8962 do not qualify as self-employed health insurance. This prevents the iterative calculation and produces Return Note 389. In this circumstance, enter only the insurance premiums on screen C or F that are not reported on screen 95A and allow Form 7206* to calculate the remaining deduction.

Figure the SEHI deduction manually

  • Enter the calculated amount using the SEHI screen.
    • An adjustment field is available on screen 4 in Drake22 and prior.
  • Determine what should be reported on Form 8962 and use the override fields on screen 8962 to achieve the desired results.

See Rev. Proc. 2014-41.


*In prior years, Wks SEHID is generated instead. Form 7206 is new starting in tax year 2023.


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