Health Insurance

Are Health Insurance Premiums Tax-Deductible? Q&A

Health insurance is one of some Americans’ highest monthly expenses, leaving them wondering which medical expenses can be deducted tax-free to reduce their bills. As health care prices rise, some consumers are looking to reduce costs by taking a tax deduction on their monthly health insurance premiums.
If you have employer-sponsored health insurance, your premiums may already be tax-deductible. If your bonuses were paid through a payroll deduction plan, they’re likely paid in pre-tax dollars, so you won’t be able to claim a year-end tax deduction.
However, you can still claim a deduction if your total health care expenses for the year are high enough. Self-employed people may be entitled to write off their health insurance premiums, but only if they meet certain criteria. 1 This article covers tax-deductible medical expenses, including eligibility requirements.

Is health insurance tax deductible?

Health insurance premiums are federal tax deductible in some cases because these monthly payments are classified as medical expenses. If you pay for your health insurance yourself, you can usually deduct that amount from your taxes. Whether these expenses are tax-deductible depends on your income and your insurance.

Self Employed Health Insuranzce Deduction

If you are self-employed and have an annual surplus, you can claim health insurance premiums paid for yourself, your spouse and dependents. This is the standard health insurance deduction used to reduce AGI – it is not a gross expense statement.

Do I take the standard deduction or list my expenses?

Whether you take the standard deduction or the individual deduction depends on your financial situation. Choosing one or the other isn’t permanent — you can switch each year when you file your taxes. To determine which method is best for you, we encourage you to review Schedule A (Form 1040). Add up all eligible personal expenses, including medical expenses, and compare that figure to the standard deduction that applies to you. If your itemized expenses exceed your standard deductible, you can save money by taking the time to itemize them. You can also use this IRS tool to determine which medical expenses are deductible.

What if I qualify for a Federal Contribution Grant?

For coverage purchased through the health insurance marketplace, you may be eligible for an income-based premium subsidy, also known as an Advance Premium Tax Credit (APTC). Rewards paid for by you that are refunded by APTC are not deductible from your taxes. However, any remaining premiums may be deducted.
Let’s say your APTC is $300 and your tax return shows that you can deduct $500 in incentives. In this case, you can claim an additional $200 upon return. If your eligible tax deduction is less than your APTC amount, the difference will be deducted from your refund or added to your balance due.

Which medical expenses are not tax deductible?

Any medical expenses reimbursed to you elsewhere are not deductible. This includes premium deductions, as these already reduce the amount you pay for your health insurance.
Other non-deductible expenses include cosmetic expenses or procedures not related to your health, over-the-counter drugs, and general health items such as toothpaste, vitamins, or diet foods.

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