Quick Answer
Solo freelancers cannot set up an HRA for themselves because the IRS requires HRAs to be employer-sponsored plans with at least one employee. However, freelancers with employees can establish HRAs, and married freelancers may qualify if their spouse employs them in the business.
Best Answer
Priya Sharma, Small Business Tax Analyst
Best for freelancers working alone without employees or a business spouse
Can a solo freelancer set up an HRA?
Unfortunately, no. According to IRS regulations and the Employee Retirement Income Security Act (ERISA), Health Reimbursement Arrangements must be employer-sponsored plans with at least one employee. As a solo freelancer, you are considered self-employed, not an employee of your own business, which disqualifies you from establishing an HRA for yourself.
Why the IRS doesn't allow self-sponsored HRAs
The IRS created HRAs specifically as employer-provided benefits to reimburse employees for qualified medical expenses. The tax code requires a clear employer-employee relationship, which doesn't exist when you're working for yourself. This same principle applies to other employer-sponsored benefits like group health insurance and dependent care assistance programs.
Example: What happens if you try anyway
Let's say you're a freelance graphic designer earning $80,000 annually and you attempt to set up an HRA to reimburse yourself $3,000 in medical expenses. The IRS would:
Better alternatives for solo freelancers
Health Savings Account (HSA)
If you have a High Deductible Health Plan (HDHP), you can contribute up to $4,300 for self-only coverage in 2026. HSA contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
Example calculation:
Self-employed health insurance deduction
You can deduct 100% of health insurance premiums for yourself, your spouse, and dependents as an above-the-line deduction on Form 1040.
Example:
What you should do
1. Maximize your HSA if you have an HDHP-eligible plan
2. Claim the self-employed health insurance deduction for your premiums
3. Keep detailed records of all medical expenses for potential itemized deductions
4. Consider an Individual Coverage HRA (ICHRA) if you have employees
Use our [deduction finder tool](deduction-finder) to identify all health-related deductions available to freelancers.
Key takeaway: Solo freelancers cannot establish HRAs for themselves, but HSAs and the self-employed health insurance deduction can provide significant tax savings—potentially $1,600+ annually for a freelancer in the 24% tax bracket.
*Sources: [IRS Notice 2002-45](https://www.irs.gov/pub/irs-drop/n-02-45.pdf), [IRS Publication 535](https://www.irs.gov/pub/irs-pdf/p535.pdf)*
Key Takeaway: Solo freelancers cannot set up HRAs, but HSAs and self-employed health insurance deductions can save $1,600+ annually in taxes.
Health benefit options available to different types of freelancers
| Freelancer Type | HRA Eligible? | Best Alternative | Potential Annual Tax Savings |
|---|---|---|---|
| Solo Freelancer | No | HSA + Self-Employed Health Insurance Deduction | $1,600-3,200 |
| Freelancer with Employees | Yes | HRA for all employees | $2,000-5,000+ |
| Married Freelancer | Potentially* | Spousal Employment HRA | $1,500-4,000 |
| High-Earning Freelancer | Depends on structure | Maximum HSA + Premium Deduction | $3,000-8,000+ |
More Perspectives
Priya Sharma, Small Business Tax Analyst
Best for freelancers who have hired employees and can qualify as an employer
HRAs for freelancers with employees
If you're a freelancer with employees, you can establish an HRA because you qualify as an employer under IRS regulations. This creates legitimate employer-employee relationships that satisfy HRA requirements.
How it works for employer-freelancers
Once you have at least one employee, you can:
Example: You're a freelance marketing consultant with two part-time employees. You establish an HRA with a $2,400 annual limit per participant. Your business can deduct $7,200 annually ($2,400 × 3 participants), and all reimbursements are tax-free to recipients.
Requirements and considerations
Administrative costs: Expect to pay $100-300 annually for plan administration, plus setup costs of $200-500.
Key takeaway: Freelancers with employees can establish HRAs, potentially saving thousands in taxes, but must ensure compliance with non-discrimination rules and proper plan administration.
Key Takeaway: Freelancers with employees can establish HRAs, potentially saving thousands in taxes while providing valuable benefits to their team.
Priya Sharma, Small Business Tax Analyst
Best for married freelancers whose spouse can employ them in the business
The spousal employment strategy
Married freelancers have a unique opportunity: if your spouse can legitimately employ you in their business (or vice versa), you may qualify for HRA benefits through that employer-employee relationship.
How to structure spousal employment
Requirements:
Example scenario: Your spouse runs a consulting firm and employs you to handle administrative tasks, client communications, and bookkeeping. They pay you $24,000 annually and establish an HRA with a $3,000 annual benefit.
Tax benefits:
Important compliance notes
Warning: The IRS may challenge arrangements that appear to be solely for tax benefits without genuine business purposes.
Key takeaway: Married freelancers can access HRA benefits through legitimate spousal employment, but proper documentation and genuine work relationships are essential to avoid IRS challenges.
Key Takeaway: Married freelancers can potentially access HRA benefits through spousal employment arrangements, but genuine work relationships and proper documentation are crucial.
Sources
- IRS Notice 2002-45 — Health Reimbursement Arrangements
- IRS Publication 535 — Business Expenses
Related Questions
Reviewed by Priya Sharma, Small Business Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.