Fourth, COBRA continuation coverage if you recently left a job with insurance. COBRA lets you keep your old employer plan for 18 months after you leave, but you pay the full premium (employer share plus employee share) plus a 2 percent admin fee. The cost is usually 500 to 1,500 a month for an individual. COBRA is the right choice for the first 30 to 60 days after a job loss, while you set up a Marketplace plan.
The self-employed health insurance deduction
The self-employed health insurance deduction lets you deduct 100 percent of your health insurance premiums on Schedule 1 of Form 1040, above the line. The deduction reduces your Adjusted Gross Income (AGI), which means it lowers your income tax, your self-employment tax, and your Medicare surtax. The savings are significant: at the 24 percent federal bracket plus 15.3 percent self-employment tax, a 6,000 dollar annual premium saves about 2,360 dollars in federal taxes.
The deduction covers the premium for yourself, your spouse, your dependents, and your children under 27. It covers Marketplace premiums, off-Marketplace premiums, COBRA premiums, and Medicare Part B and Part D premiums. It does not cover the cost of the dental or vision rider (you can deduct those separately as medical expenses on Schedule A, but only above the 7.5 percent AGI threshold). The deduction is limited to the net profit from your self-employment for the year; if your business lost money, the deduction cannot create a loss but can carry forward to the next year.
The right way to claim it is to add up the premiums you paid for the year (the 1095-A from the Marketplace or the year-end statement from your insurer), report the total on Schedule 1 line 17, and let the tax software carry it to Form 1040. The deduction stacks with the HSA contribution deduction and the self-employed retirement plan contribution deduction, so a healthy self-employed person with a 4,400 dollar HSA contribution and a 6,000 dollar health insurance premium can deduct 10,400 dollars from AGI in 2026.
What to skip and what to buy
Three things are not worth paying for. First, the Platinum Marketplace plan. The premium is 30 to 50 percent more than a silver plan, and the lower deductible rarely justifies the higher monthly cost for a self-employed person without employer contributions. Second, the dental and vision rider on the Marketplace plan. Standalone dental and vision plans (Delta Dental, VSP, Humana) are 25 to 50 percent cheaper for the same coverage, and you can switch them year to year. Third, the accident and critical illness rider. These riders pay a lump sum if you have a covered event, but the actuarially fair price is much higher than the payout, so they are a bad bet for most people.
Three things are worth paying for. First, the HSA. The 2026 contribution limit is 4,400 for an individual and 8,750 for a family, and the contributions are pre-tax, the growth is tax-free, and the withdrawals for medical expenses are tax-free. Second, the prescription drug rider if you take any maintenance medication. The rider is 10 to 30 a month and saves hundreds a year on a single brand-name prescription. Third, the out-of-network coverage if your doctors are split between two health systems. The rider is 20 to 50 a month and protects you from a 30,000 dollar bill if you need an out-of-network specialist.
The total cost in 2026 for a self-employed person is 350 to 950 a month for an individual plan, 1,100 to 2,800 for a family, before the subsidy and the deduction. After the subsidy and the deduction, the effective net cost for a healthy self-employed person making 60,000 a year is 100 to 250 a month. The right way to budget is to assume the middle of the range, claim the self-employed deduction, contribute the max to the HSA, and pick the plan that covers your specific doctors and prescriptions, not the plan with the lowest premium.
Photo: StartupStockPhotos, Pixabay Content License, via Pixabay (https://pixabay.com/photos/man-laptop-businessman-entrepreneur-593372/)
Fazlur Rahman
