When you are self-employed, such as being in private practice and set up as a single-member LLC, you are allowed to claim a tax deduction for the health insurance premiums that you pay for yourself and your family. To qualify to claim this tax deduction you cannot be eligible to participate in a health insurance plan subsidized by an employer (either your own employer if you work elsewhere as well, or your spouse’s employer plan).
Another consideration if you plan to purchase your own health insurance coverage as a self-employed individual – you should discuss with your advisor if it would be more beneficial to purchase a high deductible health plan (HDHP) and pair your HDHP plan with a Health Savings Account (HSA). There are several advantages to funding an HSA. First, the contributions to your HSA are tax deductible (capped annually). Second, the earnings in your HSA grow tax-free. Third, withdrawals used for qualified medical expenses are tax-free. And fourth, there is no “use it or lose it” policy – funds not used in the current year, carry over and can be used in a future year.