There are many good reasons to work at least part time in retirement. Not only does it provide a little extra income, but it also keeps you engaged and helps you avoid isolation.
Still, one major benefit of starting a self-employed side hustle is often overlooked.
Once you turn 65, you will likely sign up for Medicare, the federal health insurance program for people who are 65 or older or have certain disabilities or conditions.
That means paying health insurance premiums to the federal government. However, those who are self-employed can save a little money by deducting these premiums on their tax return.
What’s more, this deduction is available even to people who claim the standard deduction, as we report in “15 Tax Deductions Anyone Can and Should Claim — No Itemizing Necessary.”
Note that you must be a contractor — such as a gig worker, freelancer or consultant — to qualify as self-employed. Or, you must own a business.
But if any of those situations apply, you should be eligible for the deduction. The IRS says this about the health insurance deduction:
“You may be able to deduct the amount you paid for health insurance, which includes medical, dental, and vision insurance and qualified long-term care insurance for yourself, your spouse, and your dependents.”
The IRS also states that Medicare premiums specifically are eligible for the deduction: “Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction.”
To qualify for the deduction, you typically must show a net profit for the year on your tax return.
The amount of the deduction depends on multiple factors that are specific to your situation. For the 2024 tax year, they are:
- The total amount you paid for qualifying health insurance coverage
- Your net profit after minus two particular deductions (any deductible portion of your self-employment tax and any deduction for self-employed SEP, SIMPLE or qualified retirement plans — which you can find on lines 15 and 16, respectively, of Schedule 1 of your 2024 tax return)
- Your other earned income, if any (which you can find on line 1h of your 2024 tax return)
To get a better idea of how much the self-employed health insurance deduction might be worth in your situation, complete the “Self-Employed Health Insurance Deduction Worksheet” found in the IRS’ tax return instructions.
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