LLC owner health insurance works differently depending on whether you’re the only person in the business and how the LLC is taxed. A solo owner with no employees usually buys an individual plan through the ACA Marketplace and claims the self-employed health insurance deduction at tax time. Add even one W-2 employee who isn’t your spouse and you unlock group coverage, reimbursement arrangements, and a small-business tax credit that solo owners can’t touch. Elect S-corporation treatment and the paperwork changes again. The right plan is whichever one you’re actually eligible for once those pieces line up.
Buying Your Own Plan Through the Marketplace
If your LLC has no employees other than you, the federal Health Insurance Marketplace is the standard route. You apply as an individual and pick from Bronze, Silver, Gold, and Platinum tiers that trade lower premiums for higher deductibles or the reverse.1HealthCare.gov. Health Care Insurance Coverage for Self-Employed Individuals
Premiums swing hard by age, location, tobacco use, and tier. A 30-year-old in a low-cost state might pay under $300 a month for a Silver plan; a 55-year-old in a high-cost metro could face $900 or more before subsidies. Run a quote on HealthCare.gov or your state exchange rather than working from any average.
Before you buy your own policy, check whether a spouse’s employer plan offers dependent coverage. Employer plans usually cover a large share of the premium, and that subsidy never shows on a pay stub, so the sticker price can look deceptively high next to what you’d actually owe.
Premium Tax Credits That Lower the Bill
Self-employed LLC owners qualify for premium tax credits on Marketplace plans on the same terms as W-2 workers. Eligibility is based on your projected household income for the coverage year, not last year’s return.1HealthCare.gov. Health Care Insurance Coverage for Self-Employed Individuals You can take the credit in advance each month to reduce what you pay the insurer, or claim it as a lump sum when you file.
For 2026, the standard rule is back in force: household income has to fall between 100% and 400% of the federal poverty level. The temporary expansion that removed the 400% ceiling ran through tax year 2025 and is not currently extended.2Internal Revenue Service. Questions and Answers on the Premium Tax Credit Unless Congress renews it, households above 400% will not qualify for any premium assistance in 2026.
Income estimates matter more for the self-employed than for salaried filers because your net earnings move around. Overestimate and you pay too much premium up front; underestimate and you’ll owe the difference at tax time. Update the Marketplace during the year if your projection changes.
Eligibility disappears for any month you could enroll in an employer-sponsored plan, including your own LLC’s group plan or a spouse’s plan, whether or not you actually take it.1HealthCare.gov. Health Care Insurance Coverage for Self-Employed Individuals
What Changes When You Hire an Employee
The presence of one W-2 common-law employee who isn’t an owner or an owner’s spouse is the dividing line between the individual market and the small group market. Without one, most carriers won’t sell your LLC a small group policy no matter how it’s organized.
With one, you can buy through the Small Business Health Options Program (SHOP), open to employers with 1 to 50 full-time equivalent employees. In most states, at least 70% of the eligible employees you offer coverage to must either enroll or have qualifying coverage elsewhere.3HealthCare.gov. Find Out if Your Small Business Qualifies for SHOP Premiums the business pays for group coverage are a deductible business expense.
Small Business Health Care Tax Credit
LLCs that buy group coverage through SHOP may also qualify for the Small Business Health Care Tax Credit under IRC Section 45R. The credit is worth up to 50% of the premiums the business pays, or 35% for tax-exempt employers. The eligibility rules are narrow:
- No more than 25 full-time equivalent employees.
- Average annual wages below an indexed threshold (originally $25,000 in 2013).
- The employer must pay at least 50% of each enrolled employee’s premium.
- The plan must be bought through SHOP.
The credit reaches its full value for employers with 10 or fewer employees at average wages of $25,000 or less (indexed), and it phases out as either number climbs. You can only claim it for two consecutive tax years.4Office of the Law Revision Counsel. 26 USC 45R – Employee Health Insurance Expenses of Small Employers
Reimbursing Employees Instead of Buying a Group Plan
If your LLC has fewer than 50 full-time employees and doesn’t offer group coverage, a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) lets you reimburse employees for individual health premiums and medical expenses with pre-tax dollars. For 2026, the annual maximum is $6,450 for self-only coverage and $13,100 for family coverage. The arrangement must be funded entirely by the employer, and employees cannot trade it for higher salary.5HealthCare.gov. Health Reimbursement Arrangements (HRAs) for Small Employers
You have to give current employees written notice at least 90 days before each plan year, and new employees notice as soon as they’re eligible. The notice must state the reimbursement amount and warn employees that the QSEHRA can affect their eligibility for Marketplace premium tax credits.5HealthCare.gov. Health Reimbursement Arrangements (HRAs) for Small Employers
An Individual Coverage Health Reimbursement Arrangement (ICHRA) works on the same principle but is open to employers of any size, and it has no statutory cap on contributions. You set the annual amount for each employee class.6HealthCare.gov. Individual Coverage Health Reimbursement Arrangements (HRAs) That flexibility appeals to LLCs that want to adjust costs year to year rather than commit to a fixed reimbursement ceiling.
The Self-Employed Health Insurance Deduction
IRC Section 162(l) lets eligible self-employed people deduct premiums for themselves, a spouse, dependents, and children under age 27. The deduction goes on Schedule 1 (Form 1040), Line 17, as an adjustment to gross income, so it lowers your AGI whether or not you itemize.7Internal Revenue Service. Instructions for Form 7206
Two limits trip people up. First, the deduction can’t exceed your net earned income from the business that established the plan. If the LLC nets $30,000 and you paid $36,000 in premiums, your deduction stops at $30,000.8Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses Second, no deduction is allowed for any month you were eligible for a subsidized employer plan, including through a spouse. Six months of eligibility for a spouse’s family coverage means only the remaining six months’ premiums are deductible.
The deduction reduces income tax only, not self-employment tax. And it doesn’t stack with the Schedule A medical expense deduction for the same premiums: anything you claim under Section 162(l) is excluded from the Schedule A calculation.8Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
One more overlap to know: you can’t claim the premium tax credit and the self-employed deduction on the same dollars of premium. If a credit covers part of the bill, only your out-of-pocket share is deductible. The IRS allows two computational methods to resolve the circular math between Form 7206 and Form 8962. Tax software handles it; by hand, it takes time with the instructions.
Special Rules for S-Corp LLCs
If your LLC has elected S-corporation tax treatment and you own more than 2% of the company, the sequence for deducting your health insurance is specific. The LLC must either pay your premiums directly or reimburse you, then include that amount as wages on your W-2. The premiums go into Box 1 but not Boxes 3 and 5, so they’re subject to income tax withholding but not Social Security or Medicare.9Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues
Once the premiums appear on your W-2, you claim the self-employed health insurance deduction on Schedule 1 like any other eligible self-employed person. Skip the W-2 inclusion and the IRS treats you as ineligible for the deduction. The mistake happens when an S-corp owner pays premiums personally, never routes them through payroll, and tries to deduct at year-end. The company must pay or reimburse first, report the amount as wages, and then you deduct on your personal return.9Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues
Stacking an HSA With a High-Deductible Plan
Enrolling in a qualifying high-deductible health plan (HDHP) lets you open a Health Savings Account, which offers three tax breaks stacked together: contributions reduce taxable income, the balance grows tax-free, and withdrawals for qualified medical expenses come out tax-free.
For 2026, contributions are capped at $4,400 for self-only coverage and $8,750 for family coverage, with an extra $1,000 catch-up if you’re 55 or older and not yet on Medicare. To qualify as an HDHP, the plan’s deductible must be at least $1,700 (self-only) or $3,400 (family), and its out-of-pocket maximum can’t exceed $8,500 (self-only) or $17,000 (family).10Internal Revenue Service. Revenue Procedure 2025-19
HSA balances roll over indefinitely and can be invested. After age 65, withdrawals for any purpose avoid the penalty, though non-medical use is taxed as ordinary income. For an LLC owner without a 401(k) match to lean on, funding an HSA is one of the most efficient tax moves available.
Bridging a Gap After Leaving a W-2 Job
If you just left an employer to start the LLC, COBRA lets you continue that employer’s group plan for up to 18 months, longer in some circumstances. You pay the full premium the plan charges plus a 2% administrative fee, up to 102% of the total.11U.S. Department of Labor. Continuation of Health Coverage (COBRA) The bill often reveals what coverage actually costs when no employer is subsidizing it.
Short-term, limited-duration plans are another option, with real limits. Under current federal rules they can last no more than four months total, including renewals.12Federal Register. Short-Term, Limited-Duration Insurance and Independent Noncoordinated Excepted Benefits Coverage They aren’t required to cover pre-existing conditions, often exclude mental health and prescription drugs, and don’t count as minimum essential coverage. Use them for a short bridge, not as a substitute for real insurance.
When to Enroll and What You’ll Need
Individual Marketplace open enrollment runs November 1 through January 15. Plans selected by December 15 generally start January 1; enrollments from December 16 through January 15 start February 1.13HealthCare.gov. When Can You Get Health Insurance? Outside that window, you need a Special Enrollment Period triggered by an event like losing existing coverage, moving, getting married, or having a child.14HealthCare.gov. Special Enrollment Periods
To apply, have Social Security numbers for everyone in the household applying, an estimate of household net income for the coverage year, and immigration or citizenship documentation if applicable.15HealthCare.gov. Health Plan Required Documents and Deadlines The Marketplace uses your projected net self-employment income to size your subsidy, so put real effort into that number.