The Self-Employed Health Insurance Deduction in Michigan

Short answer: if you are self-employed in Michigan with a profit, you can deduct the health insurance you pay for yourself, your spouse, your dependents and children under 27, on Form 7206 and Schedule 1, line 17. Three limits apply: no month you could join an employer plan (yours or your spouse’s), no more than the business’s profit, and no cut to self-employment tax. Michigan starts from federal adjusted gross income, so the deduction also lowers your state tax at the flat 4.25% rate (2026). (Reviewed November 2026 by Daniel Griffin, licensed independent advisor, NPN #22052447. Not tax advice; confirm with your tax preparer.)

• $7,757a year of the lowest-cost Silver plan for a 40-year-old in the typical Michigan county, 2027, all deductible
• $63,840the 2027 subsidy line for one person in Michigan; the deduction can pull your income under it
• Line 17of Schedule 1, where a Michigan contractor, consultant or LLC owner claims it
• $330of Michigan tax saved on a year of the typical plan at 4.25%

Who Qualifies in Michigan

• You have a net profit as a sole proprietor or single-member LLC (Schedule C or F), or self-employment earnings as a partner.
• The plan is under your business. For a sole proprietor, a policy in your own name counts, from the Michigan marketplace or a private plan.
• No employer plan was open to you that month, through your own job or your spouse’s, even one you turned down.
• The people covered are you, your spouse, your dependents, or a child under 27 at the end of the year.

Own an S corporation? The company has to pay the premiums and put them on your W-2: see the S-corp health insurance deduction in Michigan.

The Three Limits

• The spouse ruleAny month your spouse’s employer offers you a subsidized plan is out, even if you never enrolled. Count the months carefully when a spouse changes jobs.
• The profit capNo more than the business earned after the deductible half of self-employment tax and your SEP, SIMPLE or solo 401(k) contributions. The cheapest Detroit Silver plan at 40, $6,869 a year, needs at least that much left.
• Not for SE taxIt lowers income tax only. On $72,000 of profit, self-employment tax is still about $10,173 either way.

The Deduction and the Michigan Subsidy Line

For 2027 coverage there is no premium tax credit above 400% of the poverty line: $63,840 for one person, $132,000 for a family of four. The self-employed health insurance deduction comes off before that test, so it can move you to the right side of the line.

What It Is Worth in Michigan for 2027

Michigan’s return begins with your federal adjusted gross income and taxes it at a flat 4.25% for 2026, so the deduction lowers your Michigan tax as well. The marketplace in Michigan has 7 insurers for 2027, a median of 44 plan options per county, and a PPO in 72 of its 83 counties.

Bronze, Silver and Gold in Michigan

In 44 of Michigan’s 83 counties the cheapest Gold plan for 2027 costs less than the cheapest Silver plan, the result of a pricing practice called silver loading. In Detroit the cheapest Gold plan is $588 a month with a $1,100 deductible; the cheapest Silver is $572 with a $4,700 deductible. Above the subsidy line you pay the whole premium yourself, so price every metal level before you pick; whichever plan you choose, its full premium is what you deduct.

Bronze and an HSA. Since 2026 every Bronze plan sold through the marketplace counts as an HSA-qualified plan (IRS Notice 2026-05). In Detroit the cheapest Bronze for a 40-year-old is $415 a month with a $11,000 deductible, $1,886 a year less than the cheapest Silver. For 2027 you can also put up to $4,500 into the HSA ($9,000 with family coverage): a second deduction, on Form 8889, on top of the premiums.

Michigan Business Taxes When You Work for Yourself

Michigan begins with federal adjusted gross income, so the self-employed health insurance deduction carries through to your Michigan return at the flat 4.25% rate for 2026.

How to Claim It

1. Keep the recordsPremium statements for each month, and any marketplace Form 1095-A.
2. Count the monthsLeave out any month an employer plan was open to you or your spouse.
3. Form 7206A year of the Detroit plan, $6,869, capped at your profit after half of SE tax and retirement savings.
4. Schedule 1Line 17: the result comes off your income on Form 1040.

Before the year closes: the year-end checklist, every date in order. Tax professionals with Michigan clients: a printable one-page Michigan handout.

Common Questions

Can I deduct health insurance if I am self-employed in Michigan?

Yes, if your business has a net profit and you could not join an employer plan, yours or your spouse’s, that month. You deduct the premiums on Form 7206 and Schedule 1, line 17. Michigan starts from federal adjusted gross income, so the deduction also lowers your state tax at the flat 4.25% rate (2026).

Can the deduction help me qualify for a premium tax credit?

It can. The deduction lowers the income tested against the 2027 subsidy line ($63,840 for one person, $132,000 for a family of four). The credit then lowers the premium you deduct, and IRS Publication 974 settles both together.

Does the self-employed health insurance deduction lower Michigan tax?

Yes. Michigan’s return begins with federal adjusted gross income, which the deduction reduces, and taxes it at a flat 4.25% for 2026.

Sources

• IRS, Instructions for Form 7206 (2025)
• IRS, Notice 2008-1 (2-percent S corporation shareholders)
• 26 U.S. Code section 162(l)
• IRS, Publication 974 (premium tax credit)
• Michigan Department of Treasury, State Individual Income Tax Rate for 2026 Tax Year Determined (April 15, 2026)
• CMS, Plan Year 2027 Qualified Health Plan Landscape file
• HHS, 2026 poverty guidelines (2027 coverage)
• Social Security Administration, 2027 fact sheet (wage base)
• Michigan Department of Treasury, MI-1040 instructions (2025)
• IRS, Notice 2026-05 (Bronze and catastrophic plans as HSA-qualified plans)
• IRS, Revenue Procedure 2026-24 (2027 HSA limits)