Entering self-employed health insurance deductions in ProConnect Tax

What's new for the Self-employed health insurance deduction for tax year 2023:

Starting in tax year 2023 the IRS has released Form 7206 to calculate the Self-employed health insurance deduction for the 1040. In tax years 2022 and prior, the IRS used the Self-employed health insurance deduction worksheet from the 1040 instruction booklet to calculate the allowable deduction on the 1040.

Table of contents:

Entering Self-Employed Health Insurance Premiums starting in tax year 2023

Use IRS Publication 974 instead of the worksheet in these instructions if the insurance plan was considered to be established under your business and was obtained through the Marketplace, and advance payments of the premium tax credit were made or you are claiming the premium tax credit.

The self-employed health insurance deduction appears on Schedule 1 (Form 1040), line 17. If the premiums are from a K-1 S-Corporation see Entering self-employed health insurance premiums from S-Corporation K-1.

All others:

1. Go to Input Return ⮕ Deductions ⮕ Adjustments to Income.
2. From the top of the screen, select Health Insurance.
3. In the SE Health Insurance (7206) section enter the appropriate amount in Premiums not entered elsewhere (excluding long-term care).

Back to Table of Contents

Eligibility and limits from Form 7206 instructions

• You must have self-employment income — for example, a net profit reported on Schedule C or F, partnership earnings on Schedule K-1 box 14 code A, optional method on Schedule SE, or wages from an S corporation in which you were a more-than-2% shareholder.
• The insurance plan must be established, or considered established, under your business. See the IRS Form 7206 instructions for how this applies to sole proprietors, partners, and S corporation shareholders.
• Medicare premiums you voluntarily pay can be included. Payments from retirement plans for retired public safety officers can’t be used to figure this deduction.
• Generally, you can deduct the total amount paid for coverage for yourself, your spouse, dependents, and children under age 27 at year end — unless you were eligible for an employer-subsidized plan.

Use Form 7206 instead of the worksheet if any of these apply:

• You had more than one source of income subject to self-employment tax.
• You file Form 2555.
• You’re using amounts paid for qualified long-term care insurance to figure the deduction.

Back to Table of Contents

Adjusting the SE health insurance deduction starting in tax year 2023:

1. Go to Input Return ⮕ Deductions ⮕ Adjustments to Income.
2. From the top of the screen, select Health Insurance.
3. In the SE Health Insurance (7206) section scroll down to Net Earnings Adjustments.
4. Use the Net profit of business under which plan is established [Adjust] and Net profit of all business [Adjust] fields to adjust the calculations on the 7206.

ProConnect Tax automatically limits the self-employed health insurance deduction to the lesser of:

• the total premiums entered, or
• your net earnings from self-employment, minus any qualified retirement plan contributions and one-half of the self-employment tax deduction reported on Form 1040.

If you want to limit the deduction based on the net income of a specific business activity, be sure to indicate the form and activity name or number in the applicable fields.

The program carries the allowed (limited) amount to Form 1040 and sends any remaining premium amount (the portion not allowed) to Schedule A as a medical expense.

ProConnect Tax doesn’t apply this limitation if any of the following apply:

• The taxpayer files Form 2555 or Form 4563,
• Income is excluded from Puerto Rico sources, or
• The taxpayer claims a net operating loss (NOL) deduction.
  In these cases, use the adjustment fields to modify the deduction manually.

If the taxpayer has net earnings or gains—other than capital gains—from the disposition, transfer, or licensing of property, ProConnect Tax doesn’t calculate the deduction automatically. Enter the appropriate amount using the adjustment fields.

Back to Table of Contents

If long-term care plans are established

If long-term care plans are established under the taxpayer's or spouse's business, and long-term care premiums were paid for persons other than the taxpayer or spouse, manually limit the premiums paid for the other person(s) based on age, per IRS Pub 525, and include the amount in Premiums not entered elsewhere (excluding long-term care).

Back to Table of Contents

Related topics

• How does the program calculate form 8962 with the self employed health insurance deduction?
• Form 1040 Self-employed health insurance FAQs
• Entering self-employed health insurance premiums from S Corporation K-1