If you run your own business, your health coverage decision affects two things at once: your monthly premium and your tax outcome. Most people only optimize one.

This guide breaks down how the self-employed health insurance deduction works, where ICHRA fits, and how to avoid common mistakes when you combine business structure, payroll, and health benefits.

Quick summary: Self-employed deduction and ICHRA are different tools. One is usually a personal tax deduction path; the other is an employer benefit design. Which is best depends on entity type, headcount, and payroll setup.

Start With the Two Buckets

1. Self-employed health insurance deduction

Generally, eligible self-employed taxpayers can deduct health insurance premiums for themselves (and eligible family members), subject to IRS limits and income rules.

2. ICHRA (Individual Coverage HRA)

ICHRA is an employer-sponsored reimbursement arrangement. The business reimburses employees for qualified individual market coverage and medical expenses up to the allowance set by the employer.

These are not interchangeable. Some business owners can use both strategically across different people in the business, but the mechanics are different.

Where ICHRA Usually Makes Sense

  • Small employers that want cost control without a traditional group plan.
  • Teams where employees want plan choice from the individual market.
  • Employers who need a fixed monthly benefits budget.
  • Owners building a scalable benefits framework as they hire.

Where Business Owners Get Tripped Up

  • Assuming all owner types are treated the same. Entity structure can change tax treatment.
  • Mixing payroll and reimbursement incorrectly. Documentation and plan setup matter.
  • Ignoring premium tax credit interactions. Marketplace subsidy outcomes can change when an HRA is offered.
  • No CPA coordination. Benefits and tax filing strategy need to be aligned early, not at filing time.
Important: Tax treatment depends on your exact facts (entity type, wages, ownership, family status, and plan design). Use this page for planning direction, then confirm implementation with your CPA or tax advisor.

Simple Decision Framework

If you are a solo self-employed filer

Start by evaluating individual coverage economics and potential deduction impact. Keep records clean and coordinate with your tax preparer before year-end.

If you have employees

Run a side-by-side: traditional small-group plan vs ICHRA allowance design vs stipend approach. Compare total employer spend, employee affordability, and administrative burden.

If you are scaling headcount this year

Design benefits once for the next 12 to 24 months, not just for this month’s premium. The wrong setup gets expensive fast when hiring accelerates.

What to Bring to a Planning Call

  • Your entity type and ownership structure.
  • Current payroll setup and who is on payroll.
  • Current health plan(s) and monthly costs.
  • Expected headcount changes this year.
  • Your CPA contact so strategy can be coordinated.

Bottom Line

For many business owners, this is not a “find the cheapest premium” problem. It is a total compensation and tax design problem. The right setup can materially improve net cost and reduce compliance headaches.

If you want help structuring options before you commit, we can map your coverage path and hand your CPA a clean summary to implement.

Need a side-by-side strategy for your business?
We will map deductible path, ICHRA fit, and enrollment options.
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