Can You Claim Deductions for Your Health Insurance Premiums?
Medical costs can be hefty, but the Internal Revenue Service provides a way to recoup some of this money through tax deductions for medical expenses. But, understanding the rules involved can be a challenge.
Are Health Insurance Premiums Deductible?
Whether or not you can enjoy a tax deduction for the monthly premiums you pay every month depends on how you get coverage. Broadly, if you pay your health insurance premiums entirely on your own you can claim them as a deduction. The details of your situation determine how premiums are deducted.
The most common reasons you can claim your health insurance premiums as a tax deduction include:
1. You are self-employed.
As a self-employed individual you may be able to deduct your health insurance premiums for yourself, your spouse and your dependents. You may also be able to write off dental and qualified long-term care insurance premiums.
2. Your premiums are paid using after-tax money.
If you paid a portion of your employer-provided health insurance, you may be allowed to deduct what you paid as a medical expense. (You can’t deduct what your employer paid.) Whether or not you paid premiums with pre-tax or after-tax money makes a difference:
Pre-tax– Pre-tax dollars aren’t included in your gross income, so you can’t claim a health insurance premium deduction. This is because you have already received a tax benefit by not paying taxes on those dollars.
After-tax– If you paid for your premiums using after-tax dollars, you may be able to claim a deduction. To qualify, these premiums must be included on Form W-2, Wage and Tax Statement.
Note that expenses paid for with funds from a flexible spending account or health savings account cannot be deducted, as a tax benefit has already been applied.
3. You purchase health insurance through the state or federal insurance marketplace.
You can deduct your portion of premium costs, but not any subsidy payments you receive.
4. You buy individual or family health insurance and pay all premiums out-of-pocket.
Whether you buy health insurance through a marketplace or on the open market, if you pay the entire cost yourself, the whole amount you pay is deductible.
5. Your total medical expenses surpass 7.5 percent of your adjusted gross income.
When all your medical expenses, including premiums, exceed 7.5 percent of your adjusted gross income, you can claim a deduction.
6. You are covered by Medicare.
Medicare parts A, B and C may be deducted as medical expenses:
- Medicare A– Premiums qualify as a medical expense only if you are not covered under social security or paid a Medicare tax as a government employee.
- Medicare B– Premiums are a medical expense.
- Medicare D – Premiums are a medical expense.
- Other Medical Expenses That May Be Deductible.
If you qualify to claim a tax deduction for medical costs, you can write off premiums as outlined above, as well as any out-of-pocket expense that is ordered by a health care professional or doctor. Keep in mind that you can only deduct for your out-of-pocket costs, such as copays and deductibles, but not for what your insurance covers for you.
Examples of Deductible Medical Expenses
The following medically-necessary expenses can be deducted:
- Medical appointments
- Prescription drugs
- Durable items
Some of the specific items that may also be deducted include:
- Transportation and travel
- Eye exams, prescription glasses and contact lenses
- Hearing aids
- Acupuncture treatments
- Lab and radiology fees
- Long-term care
- Nursing services
- Pregnancy test kits
- Psychiatric car, psychoanalysis and psychologist expenses
- Weight-loss programs
For details and a complete list of medical costs you can write off, see the IRS Publication 502.
Health Expenses That Are Not Tax Deductible
Not all medical expenses are deductible. The IRS generally does not allow deductions for:
- Any expense for which you are reimbursed.
- Cosmetic procedures (with some exceptions such as breast reconstructions costs after a mastectomy).
- Non-prescription drugs, except insulin.
- General health products such as
- Health club dues
- Diet food
- Non-prescription nicotine products
- Medical marijuana
How to Deduct Premiums and Other Medical Expenses?
Both premiums and general medical expenses must be itemized to qualify. Generally, you should only claim medical expense deductions if they are greater than your standard deduction would be.
1. If You Are Employed.
Use Schedule A (Form 1040) to deduct only a medical and dental expense amount that is more than 10 percent of your Adjusted Gross Income (AGI).
2. If You Are Self-Employed.
Your premium deduction will be noted on Schedule C (Form 1040), Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Other medical expenses are itemized on Schedule A (Form 1040).
This overview provides the basics about health insurance premium and medical expense deductions. For more detailed explanations, learn more on the IRS website. Speak with a tax professional to verify that your costs qualify as deductions.