Self-Employed Health Insurance Deduction in California
Self-employed individuals in California who pay for their own health, dental, or long-term care insurance premiums may deduct 100% of those costs as an above-the-line federal deduction on their 2025 Form 1040. This deduction reduces federal adjusted gross income and is available to sole proprietors, partners, and S-corporation shareholders who meet the eligibility requirements.
California conforms to this federal deduction, meaning the same premiums deducted federally can also reduce California state taxable income. Given California's high marginal income tax rates, which reach 13.3% for top earners, the state-level value of this deduction is substantial for self-employed residents paying significant health insurance premiums.
To qualify, the self-employed individual must not be eligible for employer-sponsored health coverage through a spouse's plan or another job. Premiums paid for a spouse, dependents, and children under age 27 can also be included. Keeping annual premium statements and proof of coverage from the insurance provider is the key documentation needed to support this deduction in California.