Are Health Insurance Premiums Tax-Deductible?

Some people are unaware  of all the tax deductions available to them, and might be missing out on great tax-savings opportunities. Remember, the more you can deduct, the better your income tax refund check will be. Medical bills can add up to a lot of money spent throughout the year, and are often overlooked as a tax deduction. But are health insurance premiums tax deductible? It depends on if you meet certain qualifications.

Employer’s Insurance

When you have a health insurance plan through an employer, your premiums are most likely already tax-free. In other words, you will not be able to write off your health insurance premiums. 

caucasian man sitting in front of a lptop with money going into a suitcase on the screen,
Most self-employed individuals can take a deduction for health insurance premiums.

Self-Employed Insurance

Most self-employed individuals can take a deduction for health insurance premiums they pay for themselves and their dependents. So, if you own your own business, you can deduct the entirety of your premium payments. You can only do so as long as you are not eligible to get insurance from another employer’s plan. 

The deduction for self-employed people is limited by the amount of your business income. You cannot deduct more than the amount of income your company makes.

figure sitting on top of "10%" sign
You are allowed to deduct any unreimbursed healthcare expenses you paid for yourself or your family, as long as it is 10% your adjusted income.

Self-employed people can deduct health insurance premiums directly on Form 1040 (Line 29 on returns). You deduct all other qualified medical expenses on Schedule A, Line 1.

The 10% Rule Of Medical Deductions

Whether you are on an employer’s insurance or your own, you can itemize medical expenses when you are doing your taxes, but there are some rules. The main rule is the 10% rule. If you paid for insurance on your own using after-tax dollars, then you can deduct some of your premiums paid. You are allowed to deduct any unreimbursed healthcare expenses you paid for yourself or your family. However, you can only do this if it is greater than 10% of your adjusted gross income. 

So, you can deduct premiums paid, and out-of-pocket costs such as doctor visits, deductibles, surgeries, and dental and vision care. If your income for the year was $40,000, then you can deduct qualified expenses that exceed $4,000 (10% of your income). If your medical expenses were, for example, $7,000, then you can deduct $3,000 from your taxable income.

To reiterate, generally if you have your employer’s insurance plan, then you are paying for premiums tax-free already. This means that you cannot deduct health insurance premiums. But, you are eligible to deduct them if your total healthcare costs go over 10% of your adjusted gross income, or if you are self-employed.

About The Author: Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.
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