If you’re a sole proprietor, S corporation and partnership for tax filing purposes, you may be able to deduct your health insurance premiums on the front of Form 1040. The benefit is that you lower your adjusted gross income, potentially making it easier to qualify for a number of tax benefits that are phased out at higher income levels, and do not lose the deduction if you do not itemize. If you’re a more than 2%-shareholder in an S corporation, the S corporation must pay the premiums directly or reimburse you for the premiums, and the premiums must be reported as income on your W-2.
Regardless of the type of business, if you were also eligible to participate in any subsidized health plan for any month or part of a month, amounts paid for health coverage for that month don’t qualify. For example: your spouse worked for XYZ Inc. for the first six months of 2009 and was eligible to participate in the company’s family plan by paying a reduced $60 per month. You were self-employed for the whole year and paid $12,000 for a policy to cover the both of you for the entire year. Only payments during the last six months of 2009 qualify.