Short answer: if you are self-employed in Tennessee 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. Tennessee has no state income tax, so the saving is federal. (Reviewed November 2026 by Daniel Griffin, licensed independent advisor, NPN #22052447. Not tax advice; confirm with your tax preparer.)
- $8,846a year of the lowest-cost Silver plan for a 40-year-old in the typical Tennessee county, 2027, all deductible
- $63,840the 2027 subsidy line for one person in Tennessee; the deduction can pull your income under it
- Line 17of Schedule 1, where a Tennessee contractor, consultant or LLC owner claims it
- $0Tennessee excise tax on a sole proprietor; it reaches LLCs and corporations
Who Qualifies in Tennessee
- 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 Tennessee 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 Tennessee.
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 Nashville Silver plan at 40, $10,425 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.
Work out your deduction
Form 7206-style worksheet. An estimate, not a tax return.Presets: the typical lowest-cost Tennessee Silver plan for 2027. Schedule SE rates and the $192,300 wage base; Line 11 counts no other income. Nothing you type leaves this page until you send it.
The Deduction and the Tennessee 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.
A single 40-year-old with $72,000 of profit pays $10,173 in self-employment tax and deducts half, $5,087. Before the health insurance deduction that leaves $66,913, over the line. Deduct a year of the lowest-cost Silver plan, $8,846, and the figure drops to $58,067, $5,773 under it.
Then the credit lowers the premium you pay, which lowers the deduction. IRS Publication 974 has the method that settles both numbers together; a licensed agent or your tax preparer can run it before you pick a plan.
What It Is Worth in Tennessee for 2027
| Household | Per month | Deductible per year | Federal tax saved at 22% | At 24% |
|---|---|---|---|---|
| One adult, 40 | $737 | $8,846 | $1,946 | $2,123 |
| Two adults, 40, and two children | $2,357 | $28,282 | $6,222 | $6,788 |
Tennessee does not tax wages or earned income: an amendment voters approved in 2014 bars any state or local tax on payroll or earned personal income (Article II, Section 28). Your own saving is federal; the company can save on Tennessee’s business taxes, below. The marketplace in Tennessee has 5 insurers for 2027, a median of 68 plan options per county, and no PPO in any of its 95 counties: every plan is an EPO.
Bronze, Silver and Gold in Tennessee
| Where | Lowest Bronze | Lowest Silver | Lowest Gold | Gold against Silver |
|---|---|---|---|---|
| Memphis (Shelby County) | $489 | $708 | $715 | $8 more |
| Nashville (Davidson County) | $581 | $869 | $862 | $6 less |
| Knoxville (Knox County) | $494 | $696 | $709 | $14 more |
| Chattanooga (Hamilton County) | $569 | $737 | $752 | $14 more |
| Murfreesboro (Rutherford County) | $581 | $869 | $862 | $6 less |
In 9 of Tennessee’s 95 counties the cheapest Gold plan for 2027 costs less than the cheapest Silver plan, the result of a pricing practice called silver loading. In Nashville the cheapest Gold plan is $862 a month with a $0 deductible; the cheapest Silver is $869 with a $9,000 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 Nashville the cheapest Bronze for a 40-year-old is $581 a month with a $11,700 deductible, $3,447 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.
Tennessee Business Taxes When You Work for Yourself
Tennessee’s 6.5% excise tax does not reach a sole proprietor, so self-employment in your own name carries no Tennessee tax on the profit. It does reach LLCs and corporations, including a one-owner LLC, with the first $50,000 of net earnings exempt.
Want the plan and the deduction worked out together?
Send your ZIP code. A licensed agent compares every Tennessee plan for your county and checks where your income lands against the subsidy line.
Check My Options →Free · No obligation · Licensed agents in 31 states · NPN #22052447
How to Claim It
- Keep the recordsPremium statements for each month, and any marketplace Form 1095-A.
- Count the monthsLeave out any month an employer plan was open to you or your spouse.
- Form 7206A year of the Nashville plan, $10,425, capped at your profit after half of SE tax and retirement savings.
- 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 Tennessee clients: a printable one-page Tennessee handout.
Common Questions
Can I deduct health insurance if I am self-employed in Tennessee?
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. Tennessee has no state income tax, so the saving is federal.
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 a sole proprietor pay Tennessee excise tax?
No. The Department of Revenue lists sole proprietors among the businesses not subject to the excise tax. LLCs, corporations, limited partnerships and business trusts do pay the franchise and excise taxes.
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)
- Tennessee Senate Joint Resolution 1 (2013), the payroll and earned-income amendment to Article II, Section 28 approved in 2014
- CMS, Plan Year 2027 Qualified Health Plan Landscape file
- HHS, 2026 poverty guidelines (2027 coverage)
- Social Security Administration, 2027 fact sheet (wage base)
- Tennessee Department of Revenue, Franchise and Excise Tax: due dates and tax rates
- Tennessee Department of Revenue, Franchise and Excise Tax Manual (June 2026)
- IRS, Notice 2026-05 (Bronze and catastrophic plans as HSA-qualified plans)
- IRS, Revenue Procedure 2026-24 (2027 HSA limits)