Can I Claim Health Insurance Premiums on My Taxes?

The deductibility of health insurance premiums is a common tax question. While it might seem straightforward, claiming these costs depends on various personal financial situations. Understanding the specific rules and exceptions is important for taxpayers seeking to reduce their taxable income.

General Rules for Deduction Eligibility

For most individuals, health insurance premiums are categorized as medical expenses. These are deductible only if a taxpayer itemizes deductions on their federal income tax return, rather than taking the standard deduction. This choice is significant because standard deduction amounts are often substantial, and many taxpayers find their total itemized deductions do not exceed this amount.

If you do itemize, a further condition applies: medical expenses, including health insurance premiums, are only deductible to the extent they exceed 7.5% of your Adjusted Gross Income (AGI). For example, if your AGI is $50,000, you can only deduct the portion of medical expenses that goes beyond $3,750.

The AGI threshold can make it challenging for many taxpayers to claim a deduction for health insurance premiums, as their total unreimbursed medical costs may not reach this percentage. Unless you have exceptionally high medical expenses, including your premiums, itemizing for this purpose might not provide a tax benefit.

Specific Claiming Scenarios

While general rules apply, certain situations offer different avenues for deducting health insurance premiums, often providing a more direct tax benefit. These scenarios are tailored to specific taxpayer circumstances, allowing for deductions not subject to the same limitations as the general itemized medical expense deduction.

Self-Employed Health Insurance Deduction

Self-employed individuals, including partners in a partnership and shareholders owning more than 2% of an S corporation, may deduct health insurance premiums. This deduction is advantageous because it is taken “above the line,” reducing your Adjusted Gross Income directly, without requiring you to itemize deductions. This can lead to a lower AGI, which might qualify you for other tax credits or deductions.

To qualify, the self-employed individual cannot be eligible to participate in an employer-sponsored health plan, including one offered by a spouse’s employer. The deduction covers premiums paid for yourself, your spouse, and your dependents, as well as a child under age 27, even if not claimed as a dependent. This deduction is claimed on Schedule 1 (Form 1040), Line 17.

Long-Term Care Insurance Premiums

Premiums paid for qualified long-term care insurance policies can be included as medical expenses. These premiums are subject to annual age-based limits set by the IRS. For example, in 2024, individuals age 71 and older can include up to $5,880 in long-term care premiums as medical expenses.

These amounts are added to your total medical expenses and are subject to the 7.5% AGI threshold if you itemize deductions on Schedule A. Self-employed individuals can deduct eligible long-term care premiums as part of their self-employed health insurance deduction, which is not subject to the AGI threshold.

Health Savings Accounts (HSAs) and Premiums

Health Savings Accounts (HSAs) offer tax benefits for healthcare, but their interaction with health insurance premiums is specific. HSA contributions are tax-deductible, reducing your taxable income, and are taken “above the line,” similar to the self-employed health insurance deduction. Regular health insurance premiums generally cannot be paid directly from an HSA tax-free.

HSA funds can be used for premiums in specific cases, such as for COBRA continuation coverage, qualified long-term care insurance premiums, and Medicare Part A, B, D, or Medicare Advantage (Part C) premiums. For most other health insurance premiums, HSA funds are intended for qualified medical expenses like doctor visits, prescriptions, and other treatments, not for ongoing premium payments.

What Health Insurance Premiums Qualify

Understanding which types of health insurance premiums are considered “qualified” medical expenses is important. This includes premiums for medical, dental, and vision insurance policies, as well as qualified long-term care insurance premiums, up to age-based limits.

Premiums for Medicare Parts B, D, and Medicare Advantage (Part C) plans are included as qualified medical expenses. COBRA premiums, which cover continuation of health coverage after employment, also qualify.

Premiums for health insurance paid by an employer on a pre-tax basis, such as through a cafeteria plan, are not deductible by the employee, as the employee already receives a tax benefit by having these premiums excluded from their taxable income. Additionally, premiums for policies that provide for loss of income or loss of life, limb, or sight are not considered qualified medical expenses.

Reporting Your Premium Deductions

Once eligibility and the qualifying amount of premiums are determined, the next step involves properly reporting these deductions on your tax forms. Accurate reporting and meticulous record-keeping are essential for substantiating any claims in case of an IRS inquiry.

For those who itemize deductions, qualifying medical expenses, including health insurance premiums, are reported on Schedule A (Form 1040), Itemized Deductions. The total amount of unreimbursed medical and dental expenses is entered on Line 1 of Schedule A.

Self-employed individuals claiming the health insurance deduction report this amount on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, specifically on Line 17. This deduction is calculated using Form 7206. Regardless of the claiming scenario, it is important to maintain thorough records. These include premium statements, Explanation of Benefits (EOB) forms, and bank statements, all of which serve as proof of payment and eligibility for the deduction.