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Are Health Care Insurance Premiums Tax Deductible?

Are health care insurance premiums tax deductible? This depends on your employment status, itemization status and method of payment for the policy. Typically you can claim health care premiums as medical expenses on your federal income taxes if paid out-of-pocket rather than through an employer and itemize deductions; additionally if self-employed you can claim a 100% deduction for qualified long-term care premiums.

Employees enrolled in group health insurance often have their monthly premium deducted pre-tax from their paycheck, helping them keep more of their hard-earned money while lowering taxable income. Furthermore, if your business offers health savings accounts (HSA), contributions made can often be tax deductible up to certain annual limits.

Self-employed individuals can take advantage of an established health insurance premium deduction to reduce their taxable income. Under the Affordable Care Act (ACA), this deduction became permanent for self-employed individuals in 2003. You may deduct this expense from total adjusted gross income by subtracting its amount by the total of premiums paid during one year – filling out and filing IRS Form 1040 will allow you to claim this benefit.

However, it is essential to keep in mind that if you receive premium subsidies through an Affordable Care Act exchange, you cannot double-dip at tax time by also deducting your health insurance premiums as itemized deductions. As premium subsidies lower your modified adjusted gross income, which decreases how many medical expenses can be deducted from federal taxes.

Additionally, medical expenses that you can deduct from your taxes include prescription drugs, dental and vision care costs, as well as travel expenses related to getting treatment. The Internal Revenue Service offers an official list of eligible expenses in Publication 502, so check it to determine what items may qualify.

Are you curious to understand how healthcare premiums and medical expenses are taxed? Our experts are ready to provide assistance.

No matter if you’re an employee or business owner, we can help maximize your benefits and protect your finances. Reach out to us now so we can begin our work together!

Kristie Adams, CPA is a senior consultant at Buckingham Advisors’ Tax and Retirement Services department. For over 25 years, she has assisted individuals and businesses navigate through an ever-evolving tax landscape while remaining compliant. Kristie specializes in all areas of personal and corporate taxation as well as being a frequent speaker at national conferences.

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