Self-Employed Health Insurance Tax Deduction in Severn, MD

Updated July 2026 · MarylandPlanFinder.com — Licensed Health Insurance Producer (NPN #21249133)

Self-employed individuals in Severn can deduct 100% of their health insurance premiums from their gross income, potentially reducing taxable income by thousands of dollars annually.
Eligibility for the deduction requires having a net profit from your business and not being eligible for an employer-sponsored health plan.
Premiums for medical, dental, and long-term care insurance are deductible, including plans purchased through the Maryland Health Connection marketplace.
In 2026, 4 carriers offer marketplace plans in Rating Area 1, which covers Severn, providing options for deductible health coverage.

For self-employed individuals in Severn, Maryland, the ability to deduct health insurance premiums from your gross income offers a significant tax advantage. This deduction, available for medical, dental, and qualified long-term care insurance, can substantially lower your taxable income, making health coverage more affordable. Unlike itemized deductions, the self-employed health insurance deduction is an "above-the-line" deduction, meaning it reduces your adjusted gross income (AGI) regardless of whether you itemize. This guide explains the eligibility requirements, how to claim the deduction, and how to find suitable health insurance plans in Severn that qualify.

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Who Qualifies for the Self-Employed Health Insurance Deduction in Maryland?

To claim the self-employed health insurance deduction, you must meet specific IRS criteria. Primarily, you must be self-employed and have a net profit from your business. This applies to sole proprietors, partners in a partnership, and S corporation shareholders who own more than 2% of the company. A crucial condition is that neither you nor your spouse can be eligible to participate in an employer-sponsored health plan, even if you choose not to enroll in one. If you are eligible for a group plan through a job (or your spouse's job), you generally cannot take this deduction. The deduction covers premiums for yourself, your spouse, and your dependents.

Finding Health Insurance Plans in Severn, MD

Self-employed individuals in Severn can explore several avenues for health insurance. The primary source for individual and family plans is the Maryland Health Connection, Maryland's state-based marketplace. Through this platform, you can compare plans, check eligibility for subsidies (Premium Tax Credits), and enroll in coverage. In 2026, 4 carriers offer marketplace plans in Rating Area 1, which includes Severn and 23 other counties across Maryland:

CareFirst BlueChoice
CareFirst of Maryland
Optimum Choice
Wellpoint

These carriers offer various plan types, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Exclusive Provider Organizations (EPOs), giving residents flexibility in choosing a plan that fits their needs and budget. Remember that the deduction applies to the portion of the premium you pay out-of-pocket, even if you receive a Premium Tax Credit to help cover costs. Severn, located in Anne Arundel County, has a population of 58,402, with an uninsured rate of 6.6%, per U.S. Census Bureau ACS 2024 5-year estimates. Anne Arundel County itself has a population of 598,166, with a slightly lower uninsured rate of 4.7%. These demographics highlight the ongoing need for accessible and affordable health coverage options for residents, including the self-employed. Local hospitals serving Anne Arundel County residents include Luminis Health Anne Arundel Medical Center, Inc in Annapolis and University of MD Baltimore Washington Medical Center in Glen Burnie, providing essential acute care services within the county.

Understanding Maryland Medicaid and CHIP for Lower Incomes

For self-employed individuals in Maryland with lower incomes, Maryland Medicaid (also known as HealthChoice) offers crucial support. Maryland expanded Medicaid in 2014, making adults with incomes up to 138% of the Federal Poverty Level (FPL) eligible for comprehensive coverage. This means that if your self-employment income falls within this range, you may qualify for Medicaid, which typically has no premiums or deductibles. Additionally, Maryland offers specific programs for pregnant women and children. Pregnant women with incomes up to 250% FPL can qualify for Maryland Medicaid, providing extensive prenatal, delivery, and postpartum care. The Maryland Children's Health Program (MCHP), the state's CHIP equivalent, covers uninsured children up to 300% FPL. Applications for these programs can be submitted through the Maryland Health Connection or your local Department of Social Services.

How to Claim the Deduction on Your Tax Return

The self-employed health insurance deduction is claimed on Schedule 1 (Form 1040), Part II, Line 17, "Self-Employed Health Insurance Deduction." This is an adjustment to income, meaning it directly reduces your gross income to arrive at your adjusted gross income (AGI). This "above-the-line" treatment is highly beneficial because it lowers your AGI, which can impact your eligibility for other tax credits and deductions that are AGI-dependent. You should keep meticulous records of all health insurance premiums paid throughout the year. If you purchase your plan through the Maryland Health Connection and receive a Premium Tax Credit, you will receive Form 1095-A, Health Insurance Marketplace Statement, which details the premiums paid and the amount of the credit received. You can only deduct the amount you personally paid, not the portion covered by the tax credit. It's advisable to consult with a tax professional to ensure you correctly calculate and claim this deduction.

Health Insurance Carriers in Severn

In 2026, self-employed individuals and families in Severn, Maryland, have access to a competitive health insurance market through the Maryland Health Connection. This marketplace, serving Rating Area 1, provides a range of options from four confirmed carriers:

CareFirst BlueChoice
CareFirst of Maryland
Optimum Choice
Wellpoint

These carriers offer a variety of plan structures, including HMO, PPO, and EPO plans, catering to different preferences for network access and cost-sharing. When selecting a plan, consider factors such as monthly premiums, deductibles, copayments, coinsurance, and the network of doctors and hospitals. Evaluate whether your preferred medical providers, such as those at Luminis Health Anne Arundel Medical Center, Inc or University of MD Baltimore Washington Medical Center, are in-network with the plan you choose.

Making the Right Decision for Your Health Coverage and Taxes

Choosing the right health insurance plan as a self-employed individual in Severn involves balancing coverage needs, budget, and tax benefits.

If your income is below 138% FPL: You may qualify for Maryland Medicaid (HealthChoice), offering comprehensive, low-cost coverage.
If your income is between 100% and 400% FPL (or higher if eligible for enhanced subsidies): You likely qualify for Premium Tax Credits through the Maryland Health Connection, which can significantly reduce your monthly premiums. The portion of the premium you pay out-of-pocket is eligible for the self-employed health insurance deduction.
If your income is above 400% FPL and you don't qualify for subsidies: You can still purchase a plan through the Maryland Health Connection or directly from an insurer, and 100% of your premiums will be eligible for the self-employed health insurance deduction, provided you meet other IRS criteria.

Understanding these options is key to maximizing both your health coverage and your tax savings. A licensed health insurance agent can help you navigate the plans available in Rating Area 1, estimate your potential subsidies, and ensure you understand how your chosen plan integrates with the self-employed health insurance deduction. This personalized guidance comes at no cost to you.

Frequently Asked Questions

Who is eligible for the self-employed health insurance deduction?

You are generally eligible if you are self-employed, have a net profit from your business, and are not eligible to participate in an employer-sponsored health plan (including one offered by your spouse's employer). This deduction can be taken even if you don't itemize deductions.

What types of health insurance premiums can be deducted?

You can deduct premiums paid for medical, dental, and long-term care insurance policies. This includes premiums for plans purchased through the Maryland Health Connection marketplace, as well as private plans. Medicare Part B, Part D, and Medicare Advantage plan premiums are also deductible if you are self-employed and not eligible for an employer-sponsored plan.

How do I claim the self-employed health insurance deduction?

The deduction is claimed on Schedule 1 (Form 1040), Line 17, 'Self-Employed Health Insurance Deduction.' It reduces your adjusted gross income (AGI), which can lower your overall tax liability and potentially increase your eligibility for other tax credits or deductions.

Can I deduct premiums if I receive a subsidy (premium tax credit)?

Yes, you can deduct the portion of your health insurance premiums that you paid out-of-pocket, after any premium tax credit (subsidy) has been applied. You cannot deduct the portion of the premium covered by the tax credit, as that portion was not paid by you.