Can I Write Off My Health Insurance Premiums on My Taxes?

Understanding whether health insurance premiums can be deducted on taxes is a valuable consideration for individuals seeking to optimize their tax liabilities. As healthcare costs rise, taxpayers aim to maximize savings through allowable deductions.

Types of Healthcare Coverage That May Qualify

Different types of healthcare coverage may qualify for tax deductions under IRS guidelines. Generally, premiums for plans purchased through the Health Insurance Marketplace, employer-sponsored plans, and certain private policies can be deductible. However, eligibility depends on the plan and the taxpayer’s circumstances.

Premiums for Medicare Part B, Part D, and supplemental policies like Medigap may also qualify if the taxpayer itemizes deductions and total medical expenses exceed 7.5% of their adjusted gross income (AGI). Only premiums not reimbursed by an employer or another entity can be deducted.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) offer tax advantages by allowing pre-tax dollars to cover eligible medical expenses, indirectly reducing taxable income. This can impact the deductibility of other healthcare-related costs.

Self-Employed Deductions

Self-employed individuals can claim the Self-Employed Health Insurance Deduction for premiums paid for medical, dental, and long-term care insurance. This deduction directly reduces adjusted gross income (AGI), lowering taxable income.

To qualify, the taxpayer must be self-employed, a partner in a partnership, or a shareholder owning more than 2% of an S corporation. The insurance plan must be established under the business, and the taxpayer cannot be eligible for a subsidized health plan through another employer, such as a spouse’s plan.

The deduction is calculated based on total premiums paid during the tax year. For instance, if a self-employed individual pays $5,000 in premiums, this amount can be deducted from gross income, provided all eligibility criteria are met. This deduction is claimed on Schedule 1 of Form 1040 and is separate from itemized deductions.

Distinguishing Out-of-Pocket Costs

Out-of-pocket costs, such as co-payments, deductibles, and certain medical supplies or procedures, can significantly impact tax liability when itemizing deductions. Only expenses exceeding 7.5% of AGI are deductible.

The IRS also permits deductions for transportation and travel expenses related to medical care, including mileage, parking fees, and public transportation costs. In 2024, taxpayers can deduct 23 cents per mile driven for medical purposes.

Effects on Adjusted Gross Income

Adjusted Gross Income (AGI) is a key factor in determining tax liability and eligibility for various tax credits and deductions. Lowering AGI through healthcare-related deductions can make taxpayers eligible for benefits like the Earned Income Tax Credit or education-related credits, which have specific income thresholds.

A reduced AGI can also decrease the percentage of income subject to taxes like the Net Investment Income Tax, which applies to individuals with AGI above $200,000 ($250,000 for married couples filing jointly). Additionally, a lower AGI can help taxpayers avoid phase-outs of personal exemptions and itemized deductions.

Considerations for Different Filing Statuses

Filing status plays a significant role in determining the deductibility of health insurance premiums and other medical expenses. The IRS uses the taxpayer’s filing status—single, married filing jointly, married filing separately, head of household, or qualifying widow(er)—to calculate deductions and eligibility thresholds, including the 7.5% AGI rule.

For married couples filing jointly, the combined AGI is used to calculate the 7.5% threshold, which can be advantageous if one spouse has significant medical expenses and the other has lower income. Taxpayers filing as married filing separately face stricter rules: if one spouse itemizes deductions, the other must also itemize, even if it reduces overall deductions. Single filers and heads of household calculate the threshold using their individual AGI.

Documentation Requirements

Proper documentation is critical when claiming deductions for health insurance premiums and medical expenses. The IRS requires detailed records to substantiate claims, as insufficient documentation can lead to denied deductions or penalties during an audit.

Taxpayers should retain receipts, invoices, and statements that specify the expense, payment amount, and date. Documents may include monthly billing statements from insurers, Form 1095-A for marketplace plans, or payroll records for employer-sponsored plans. Self-employed individuals must show that the insurance plan was established under their business.

Organizing records by category—such as premiums, co-payments, prescriptions, and travel expenses—makes calculating deductions and responding to IRS inquiries more efficient. Taxpayers should retain records for at least three years, or longer if income was underreported by more than 25%, per the IRS statute of limitations for audits.