Yes, if the person is self-employed, they can claim the Self-Employed Health Insurance Deduction (see rules below) and take the standard deduction. You should include all amounts paid to that person on their annual 1099-NEC. They will claim all the income on their return.
You, as a sole proprietor may be able to deduct medical, dental, and long-term care insurance premiums for yourself, your spouse, and your dependents if you or your jointly-filing spouse is self-employed. There are two ways to do this: through the self-employed health insurance deduction or as an itemized deduction. If you take the standard deduction, your only option to deduct the premiums is below:
Self-employed health insurance deduction
- To get this deduction, your Schedule C must show a net profit.
- The deduction amount generally can't exceed your net profit amount.
- If you (or your spouse if filing jointly) were eligible to participate in an employer's health plan during any given month—even if you declined the coverage—the premium you paid for that month can't be claimed under this deduction.
- Health insurance premiums you paid for your child, even if you aren't claiming them as a dependent, are eligible for this deduction as long as your child was age 26 or younger at the end of 2021.
- The self-employed health insurance deduction shows up on Schedule 1, line 17.
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