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The day you leave a payroll job, the paycheck stops, and so does a quiet line item that made health coverage someone else's problem. Now the premium, the deductible and the paperwork land on you.
That is a money decision and a planning decision at the same time. A health bill you did not plan for is one of the fastest ways to raid the account you meant to leave alone, so the health plan belongs in your financial plan.
Educational content, not financial, tax, legal or investment advice. Talk to a licensed professional about your situation.
Where do self-employed owners get health insurance?
HealthCare.gov says that if you are self-employed, you can use the individual Marketplace to enroll in coverage. If your business has employees, you may be able to use the SHOP Marketplace to offer coverage to yourself and them.1
Your employed spouse's plan, a plan through a professional association and other routes exist too. Which one wins depends on price, doctors and drugs, and I am not going to rank them for you.
When can you enroll?
Open Enrollment has run from November 1 to January 15, with December 15 as the last day to pick a plan for coverage starting January 1.2 Check the dates for the year you are enrolling, because rules do change.
After that, you generally need a Special Enrollment Period. Losing qualifying coverage, for example, usually gives you 60 days to enroll.3 Choosing to end coverage on your own, such as stopping COBRA premiums, does not qualify.3
How does the self-employed health insurance deduction work?
The IRS says you may be eligible if you are self-employed with a net profit, a partner with net self-employment earnings, or an S corporation owner of more than 2% who receives wages.4
It covers premiums for you, your spouse and your dependents, including qualified long-term care insurance, and it is an adjustment to income rather than an itemized deduction.4
What about S corporation owners?
The IRS says premiums for a more-than-2% shareholder-employee are reported as wages on the Form W-2, but they are not subject to Social Security or Medicare tax when paid under a qualifying plan. The shareholder can then be eligible for the above-the-line deduction.5 That handoff between the company and your personal return is why S corporation owners should let a CPA handle it. It ties straight into the salary vs distributions decision.
The deduction is not available when you or your spouse were eligible to participate in a subsidized health plan.5
What is a Health Savings Account?
An HSA is a tax-favored account you set up with a trustee. Contributions you make are generally deductible, earnings are not taxed while they stay in the account, and distributions for qualified medical expenses are tax free.6
The account is yours. The IRS says amounts left at year end are generally carried over, and the account stays with you if you change jobs or leave the work force.6
Rob Berger, a personal finance author, describes one HSA feature he likes in a video he posted on November 14, 2024:
you can save Health Care receipts for years and at any time use those receipts to take money out of an HSA [tax-free]
That is his strategy, not a promise for your situation. The IRS conditions still apply, so check them in Publication 969 and with a professional.6
VideoRob Berger
The Optimal Order to Fund Retirement Accounts
He ranks the HSA third in a five-step funding order, and explains why he would sometimes move it higher.
Who can contribute?
You must be covered by a high deductible health plan on the first day of the month, with limited exceptions for other coverage. You cannot be enrolled in Medicare, and you cannot be claimed as a dependent on someone else's return.6
For 2025, a qualifying plan has a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage, and a cap on out-of-pocket costs of $8,300 or $16,600.6
What if you spend it on something else?
Withdrawals not used for qualified medical expenses are taxable and carry an additional 20% tax. The 20% does not apply after you become disabled, reach 65 or die.6 After 65, non-medical withdrawals are taxed like income, which is why some people think of an HSA as a quiet second retirement bucket. Contributions stop once you enroll in Medicare.6
Is a high deductible plan right for you?
It depends on your cash, not just your premium. A plan with a high deductible only works if you can pay that deductible without flinching.
| High deductible plan with an HSA | Traditional plan |
|---|---|
| Must meet the deductible rules above | Deductible and copays set by the plan |
| Premiums are often lower, with more exposure early in the year | Premiums are often higher, with less exposure early in the year |
| Tax-favored savings account you own | No account attached |
| Best when you hold real cash reserves | Best when you want predictable visit costs |
I will not tell you which one to buy. I will tell you what I look for: whether the reserve behind the plan is real. If you do not have the deductible in cash, the cheaper premium is borrowed comfort. That is the same logic as the two cash buffers. Fund the deductible, then the HSA.
What if your income is hard to predict?
Marketplace savings are based on your estimated net income for the year you are getting coverage, not last year's.1 If your income is hard to predict, HealthCare.gov says self-employed applicants can submit other documents, such as a self-employment ledger.8
The tax side is where owners get hurt. Advance credit payments go to your insurer based on the income you estimated, then you reconcile on Form 8962. If your actual credit is less than the advance payments, the difference is excess advance payments.7 Reporting changes to the Marketplace promptly helps you get the proper amount of assistance.7
Translation: a great year can turn a subsidy into a bill. Keep a little extra in the tax set-aside during a hot year.
A cheap premium with an empty reserve behind it is not savings. It is a bet.
A yearly health money routine
- Calendar your enrollment window. Put November 1 on your calendar every year.
- Check your eligibility for the deduction. Premiums are a deduction only when the rules fit. A CPA can tell you in a few minutes.
- Fund the deductible in cash first. The cash buffers come before the HSA.
- Fund the HSA on a schedule. If you qualify, set a monthly transfer so it is a habit, not a December scramble.
- Update the Marketplace when income jumps. Do not wait for tax season.
My grandmother asked about my retirement, not my health plan. They belong in the same conversation, and her question is what finally got me to put both on paper. For the retirement account side, read the Solo 401(k) vs SEP IRA breakdown next. More on the whole picture is in Investing and Retirement.
Keep building.Ekai
Questions people ask
Where can a self-employed person get health insurance?
If you have no employees, you can use the individual Health Insurance Marketplace on HealthCare.gov. If your business has employees, you may be able to use the SHOP Marketplace to offer coverage to yourself and them.
Can I deduct my health insurance premiums if I am self-employed?
Often yes. The IRS describes a self-employed health insurance deduction for people with a net profit, for partners, and for S corporation owners of more than 2% who receive wages. It is an adjustment to income, and you generally cannot take it for months you were eligible for an employer-subsidized plan.
What are the HSA contribution limits for 2025?
For 2025 you can contribute up to $4,300 with self-only high deductible health plan coverage or $8,550 with family coverage. People 55 or older can add $1,000.
What is the penalty for using HSA money on non-medical costs?
Non-qualified withdrawals are taxable and carry an additional 20% tax. That extra tax does not apply to withdrawals after you become disabled, reach age 65 or die.
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