Are Medicare and supplemental insurance premiums eligible for the self-employed health insurance deduction?

Yes, often.

Medicare premiums are eligible for the self-employed health insurance (SEHI) deduction, and Medigap (Medicare supplemental) premiums are also eligible, if you otherwise qualify for the deduction. Certain other “supplemental” policies may not qualify.

Who Can Take the Self-Employed Health Insurance Deduction?

You may deduct qualifying premiums above the line on Schedule 1 (Form 1040) if all apply:

1. You have net profit from self-employment (Schedule C/F), or
   
   • You’re a >2% S-corp shareholder with wages reported on a W-2 (Box 1 includes the premiums), and
2. The insurance plan is established under your business, and
3. You (and your spouse/dependents) were not eligible for employer-subsidized health coverage for the months deducted.

Medicare Premiums - Eligible

The IRS explicitly allows Medicare premiums to be treated as health insurance for the SEHI deduction.

Deductible Medicare premiums include:

• Part A (if you pay premiums)
• Part B
• Part C (Medicare Advantage)
• Part D (Prescription drug coverage)

These premiums are deductible to the extent of your net self-employment income for the year.

Medicare Supplemental (Medigap) - Eligible

Medigap (Medicare supplemental) premiums qualify as health insurance premiums for the SEHI deduction.

• Deductible under the same rules as other health insurance
• Must meet the business/eligibility requirements above

Other “Supplemental” Policies

Special Rules by Business Type

Sole Proprietor / Partner

• Deduct on Schedule 1, Line “Self-employed health insurance deduction”
• Limited to net profit from the business

>2% S-Corporation Shareholder

• Premiums must be:
  
  • Paid or reimbursed by the S-corp
  • Included in Box 1 of the W-2
• Then deducted on Schedule 1 by the shareholder

Pitfalls to Avoid

• Deducting premiums for months you were eligible for employer coverage
• Claiming disability insurance as SEHI
• Exceeding net income limitation
• (S-corp) Not including premiums in W-2 Box 1

Summary

Yes, Medicare Parts A (if paid), B, C, D, and Medigap premiums are eligible for the self-employed health insurance deduction, provided you meet the SEHI requirements and are not eligible for employer coverage. Disability and stand-alone supplemental policies generally do not qualify.

Sources:

IRC §162(l) - Self-employed health insurance deduction

IRS Publication 535, Business Expenses (SEHI & Medicare)

IRS Publication 502, Medical and Dental Expenses (Medicare premiums)

Schedule 1 (Form 1040) Instructions