The formulas
- Eligible premiums = (medical premiums + min(LTC premiums, age limit)) x (12 - months with employer plan eligibility) / 12
- Deduction = min(eligible premiums, earned income from the business)
- 2026 LTC limits by age: $500, $930, $1,860, $4,960, $6,200
How it works
Section 162(l) lets a self-employed person deduct premiums for medical insurance for themselves, a spouse, dependents and a child under 27. The deduction cannot exceed earned income from the business under which the plan is set up, and it is not allowed for any month the person can participate in an employer-subsidized plan of their own or their spouse.
Long-term care premiums count only up to the age-based limit in section 213(d)(10). For 2026 the limits are $500 at age 40 or less, $930 to age 50, $1,860 to age 60, $4,960 to age 70 and $6,200 above. The month-by-month test is approximated here by prorating total premiums. Premiums deducted under this rule cannot also be deducted as medical expenses. An S corporation shareholder with more than 2 percent ownership uses W-2 wages as earned income.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is earned income for the limit?
Section 162(l)(2)(A) uses earned income within the meaning of section 401(c) from the business under which the plan is established.
Can I deduct premiums for a 25-year-old child?
Yes, a child under 27 at year end is covered even if not a dependent.
What if my spouse has employer coverage available?
Months of eligibility for a subsidized plan maintained by your or your spouse employer are excluded.
Sources
- 26 U.S.C. 162, Trade or business expenses, Legal Information Institute
- IRS Rev. Proc. 2025-32, 2026 inflation adjusted items
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