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

Small Business Health Insurance Tax Deductions in Severance, CO

Eligible small business owners in Severance can deduct 100% of health, dental, and long-term care insurance premiums.
The self-employed health insurance deduction is reported on Schedule 1 (Form 1040), Line 17.
Small employers with fewer than 25 full-time equivalent employees may qualify for a tax credit up to 50% of premiums.
In 2026, 6 carriers offer marketplace plans in Severance's Rating Area 4, including PPO options.

Small business owners and self-employed individuals in Severance, Colorado, can significantly reduce their taxable income by deducting health insurance premiums. The IRS allows eligible self-employed individuals to deduct 100% of premiums paid for themselves, their spouses, and dependents. This deduction applies to medical, dental, and long-term care insurance. Understanding the specific rules for eligibility and how to claim these deductions is crucial for maximizing your tax savings while ensuring access to quality health coverage through Connect for Health Colorado, the state's official marketplace.

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Who Qualifies for the Self-Employed Health Insurance Deduction?

The self-employed health insurance deduction allows eligible individuals to subtract their health insurance premiums from their gross income, reducing their adjusted gross income (AGI). This is an "above-the-line" deduction, meaning it's taken before calculating your AGI, which can be more beneficial than an itemized deduction. To qualify for this deduction as a small business owner in Severance, you must meet the following criteria:

You are self-employed and show a net profit from your business. This includes sole proprietors, partners in a partnership, and LLC members who are treated as partners for tax purposes. S-corporation shareholders who own more than 2% of the company can also qualify if the premiums are paid by the S-corporation and included in their W-2 wages.
You are not eligible to participate in an employer-sponsored health plan, either through your own employment or through your spouse's employment. If you are eligible for an employer plan, even if you choose not to enroll, you generally cannot claim this deduction.
The insurance plan must be established under your business.

This deduction can include premiums paid for medical, dental, and qualified long-term care insurance. It also covers Medicare Part B and Part D premiums, as well as Medicare Part A premiums if you voluntarily pay them.

Understanding the Small Business Health Care Tax Credit

Beyond individual deductions, small employers in Severance may also be eligible for the Small Business Health Care Tax Credit. This credit is designed to help small businesses and tax-exempt organizations afford to offer health coverage to their employees. To qualify for this credit, your business must:

Have fewer than 25 full-time equivalent (FTE) employees.
Pay average annual wages of less than $58,000 per FTE (this amount is adjusted for inflation annually).
Contribute at least 50% of the premium cost for each employee enrolled in a qualified health plan offered through Connect for Health Colorado.

The maximum credit is 50% of the premiums paid by the employer for small business employers and 35% for small tax-exempt employers. This credit is available for two consecutive tax years. It's important to note that you cannot claim both the tax credit and the deduction for the same premium costs; you must choose the more beneficial option.

Health Insurance Options for Small Businesses in Severance, CO

Severance, Colorado, located in Weld County, is part of Colorado Rating Area 4. The city has a population of 10,130 with a median household income of $124,572, per U.S. Census Bureau ACS 2024 5-year estimates. Small business owners here have several options for securing health insurance for themselves and their employees, primarily through Connect for Health Colorado. Connect for Health Colorado offers a range of plans, including Health Maintenance Organization (HMO), Exclusive Provider Organization (EPO), and Preferred Provider Organization (PPO) plans. Unlike some states, PPO plans ARE available on-exchange in Colorado, providing greater flexibility in choosing providers. In 2026, 6 carriers offer marketplace plans in Rating Area 4, which includes Severance:

Cigna
Denver Health Medical Plan
HMO Colorado
Kaiser Permanente
Select Health
United Healthcare

These carriers provide various plan tiers (Bronze, Silver, Gold, Platinum) with different levels of cost-sharing, allowing small business owners to select a plan that balances premiums, deductibles, and out-of-pocket maximums. For those with lower incomes, subsidies in the form of Advance Premium Tax Credits (APTCs) are available to reduce monthly premium costs, and Cost-Sharing Reductions (CSRs) can lower out-of-pocket expenses for Silver plans. Weld County, with a population of 350,396, is served by two acute care hospitals: Banner North Colorado Medical Center and Uchealth Greeley Hospital, both located in Greeley. These facilities provide comprehensive care for residents of Severance and the surrounding areas. Severance's uninsured rate is 2.2%, significantly lower than Weld County's 8.0%, per U.S. Census Bureau ACS 2024 5-year estimates. Weld County is a single-county rating area.

Claiming Your Health Insurance Deductions and Credits

The method for claiming your health insurance deductions depends on your business structure:

Sole Proprietors and Single-Member LLCs: If you file Schedule C (Form 1040), Profit or Loss From Business, you would claim the self-employed health insurance deduction on Schedule 1 (Form 1040), Line 17.
Partners and Multi-Member LLCs: If you are a partner in a partnership or an LLC member taxed as a partner, you will claim the deduction on Schedule 1 (Form 1040), Line 17. Your share of the premiums paid by the partnership should be reported on your Schedule K-1.
S-Corporation Shareholders: If you own more than 2% of an S-corporation and the corporation pays your health insurance premiums, these amounts are included in your W-2 wages. You then claim the deduction on Schedule 1 (Form 1040), Line 17.

For the Small Business Health Care Tax Credit, eligible employers must file Form 8941, Credit for Small Employer Health Insurance Premiums, with their tax return. It's advisable to consult with a tax professional to ensure you are correctly claiming all eligible deductions and credits for your small business in Severance.

Frequently Asked Questions

Can a small business deduct health insurance premiums in Severance, CO?

Yes, eligible small businesses in Severance, Colorado, can deduct 100% of health insurance premiums paid for themselves, their spouses, and dependents. This includes premiums for medical, dental, and long-term care insurance, provided they are not eligible to participate in another employer-sponsored health plan.

What is the small business health care tax credit in Colorado?

The Small Business Health Care Tax Credit helps small employers afford health coverage for their employees. To qualify, you must have fewer than 25 full-time equivalent employees, pay average annual wages of less than $58,000 (adjusted for inflation), and contribute at least 50% of the premium cost for each employee. The maximum credit is 50% of premiums paid for small business employers and 35% for small tax-exempt employers.

How do I report health insurance deductions as a small business owner?

Sole proprietors, partners, and LLC members typically deduct health insurance premiums on Schedule 1 (Form 1040), Line 17, for the self-employed health insurance deduction. For the small business health care tax credit, eligible employers would file Form 8941, Credit for Small Employer Health Insurance Premiums, with their tax return.

Are PPO plans available for small businesses on Connect for Health Colorado?

Yes, PPO plans are available on Connect for Health Colorado, the state's marketplace. Small business owners and their employees in Severance can choose from HMO, EPO, and PPO plan structures offered by carriers such as Cigna, Denver Health Medical Plan, HMO Colorado, Kaiser Permanente, Select Health, and United Healthcare.