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Find out if your health insurance premium is tax deductible

Meredith Miller Published: June 14, 2018 Updated: September 19, 2018

Scissors cutting taxes

With tax season right around the corner, it’s time to ask the age-old question, is your health insurance premium tax deductible? You have found your cheap health insurance quotes, now you want to know if you can save even more money. Follow our guide below on understanding when private health insurance premiums are and aren’t deductible.

When Your Health Insurance Premium Isn't Tax Deductible

You Cannot Deduct Your Premium if You Didn’t Pay For It

If another person paid for your health insurance premiums, such as an employer or government agency, they won’t be tax deductible. Additionally, if you paid part of your premium and another party paid the other part, you can’t claim a tax deduction on their part. If you bought health plans from an ACA health provider, you also cannot use your subsidy to claim a tax deduction.

You Cannot Deduct Your Premium if You Paid for it With Pre-Tax Money

If you have job-based affordable health insurance coverage, they come out of your paycheck before your income taxes are taken out. Although this usually makes your paychecks look smaller, this also means you’re paying for premiums with pretax money, which you cannot deduct from your taxes. If you’re unsure if your case applies, you should consult your payroll department or review your W-2. If you’re paying your premiums with pre-tax funds, the money won’t be included in your income on your W-2 form.

When Your Premiums Might be Deductible

You are Self Employed

If you’re currently self-employed or ineligible for a work-based health care plan via your spouse, you can write off your premiums when you do your taxes. However, you can’t deduct more in health care premiums than you earned for the year.

When you work as a self-employed worker, your private health insurance premiums are identified as an income adjustment, rather as a tax deduction, which can increase your overall income. In most cases, an adjustment is much better than a deduction. However, consider that:

  • You can still benefit from income adjustments if you don’t itemize your deductions
  • The smaller your income averages out, the easier it is to claim deductions
  • More deductions are available to those with higher incomes
  • Deductions can only be taken out if they exceed a set percentage of your overall income

You Paid Your Premiums with After-Tax Money

If you bought health plans with after-tax money, meaning residual money from your paycheck after taxes are taken out, you can deduct this money in tax season. However, you have to list the deduction as a medical expense and the deductions may be limited in size.

You Have a Qualified Medicare Premium

There are a few scenarios when your Medicare insurance coverage is tax deductible. The premiums that are deductible are Part B, Part C, Part D, and Medigap supplemental premiums. However, in order to claim this deduction on your taxes, the total amount must be higher than 7.5% of your income. Medicare Part A is usually not deductible. For those who are covered under social security and were automatically enrolled in Part A, there is nothing that can be deducted. However, you can be able to deduct your Medicare Part A health plans premiums if you and your spouse:

  • Did not pay Medicare taxes when you were working and
  • You enrolled in Part A voluntarily and
  • You are not covered under social security and
  • You pay monthly premiums

Limitations

Even if you are able to deduct your health insurance premiums, there are limits to how much you are allowed to write off. For example, if you are taking your medical-expense deduction on Schedule A, you can only write off expenses that are more than 10% of your adjusted gross income. Simply add up your health insurance premium and your other eligible, unreimbursed medical expenses like your copays, deductible, and coinsurance. If this number is larger than 10% of your adjusted gross income, then you can deduct the portion that goes over the 10%.

The process is a little different for those who are self-employed and claiming their deduction on Form 1040. In this case, your expenses do not need to go over the 10% point. This is because you are writing off your health insurance premium as an adjustment to your income instead of a deduction. This means that you profitability limits the amount that you can claim. So, you cannot claim an adjustment that equals to more than your income.

Understanding health plans are never easy. However, with the help of this guide, hopefully, you’ll now be able to better understand if your health insurance premium is tax-deductible. Now is the best time to shop around for affordable health insurance that may be tax deductible. Be sure to visit First Quote Health for a wide range of health insurance quotes from providers in your area. First Quote Health makes it easy to find affordable health insurance. Just enter your zip code and wait for the health insurance quotes to roll in.