Deduct Health Insurance Premiums: A Tax Guide for 2026

Navigating the intersection of healthcare costs and tax savings is a critical financial skill. The question, “can you deduct health insurance premiums,” is a common one, and the answer is a nuanced “it depends.” While personal medical expenses are notoriously difficult to write off, several specific scenarios allow taxpayers to deduct premiums, potentially saving thousands of dollars. Understanding the rules, which differ significantly for employees, self-employed individuals, and business owners, is the key to unlocking these valuable deductions and reducing your overall tax burden.

Understanding the Baseline: The Medical Expense Deduction

For most individuals who receive health insurance through an employer, the path to deducting premiums is narrow and often impractical. The primary mechanism is the medical expense deduction, an itemized deduction on Schedule A. To qualify, your total allowable medical and dental expenses for the year must exceed 7.5% of your Adjusted Gross Income (AGI). This threshold is high, making it beneficial primarily for those with significant medical costs beyond insurance premiums. Eligible expenses include premiums you pay for medical, dental, and qualifying long-term care insurance, but only the amounts paid with after-tax dollars. Crucially, if your employer pays a portion of your premium pre-tax (through a cafeteria plan), that portion is not deductible by you.

For example, if your AGI is $80,000, you can only deduct medical expenses that exceed $6,000 (7.5% of $80,000). If you paid $8,000 in eligible medical costs, including $5,000 in after-tax insurance premiums, you could deduct $2,000 ($8,000 total – $6,000 threshold). This deduction is often out of reach for healthy individuals or families whose medical costs are primarily their monthly premiums. Therefore, exploring other deduction avenues is essential for many.

The Self-Employed Health Insurance Deduction: A Powerful Tool

For self-employed individuals, including freelancers, independent contractors, and small business owners, the rules are far more favorable. You may be eligible for the self-employed health insurance deduction, which is an “above-the-line” deduction. This means you can claim it even if you do not itemize your deductions, directly reducing your AGI. This is a significant advantage over the medical expense deduction. To qualify, you must have net earnings from self-employment, and the insurance plan must be established under your business. The deduction cannot exceed your business’s net profit. It covers medical, dental, and qualified long-term care insurance premiums for yourself, your spouse, your dependents, and your children under age 27 at the end of the tax year, even if they are not dependents.

Key requirements for the self-employed health insurance deduction include:

• You must be considered self-employed (a sole proprietor, partner, or LLC member).
• You cannot be eligible to participate in a health plan subsidized by an employer (either your own employer if you have another job, or your spouse’s employer).
• The policy can be in your name or your business’s name.

This deduction is claimed directly on Schedule 1 (Form 1040), making it relatively straightforward. For those navigating coverage outside of traditional employment, understanding this deduction is crucial. Our resource on how to get health insurance when you are not employed provides further context on securing a plan that can then be deducted.

Health Insurance Deductions for Businesses and Employers

If you own a business with employees, the landscape shifts from personal deductions to business expenses. Generally, premiums paid by a business for employee health insurance are fully deductible as a business expense on the company’s tax return. This reduces the business’s taxable income. For C corporations, these premiums are deductible. For S corporations, partnerships, and sole proprietorships, the rules align with the self-employed deduction discussed earlier for the owner’s coverage, while premiums for employees are a business expense.

Business owners have several options for providing coverage. They can establish a group health plan, reimburse employees for individual plans (subject to strict rules to avoid penalties), or utilize a Health Reimbursement Arrangement (HRA). The deduction is typically taken on the business’s income tax return (e.g., Form 1120 for C corps, Schedule C for sole proprietors). It is vital to structure the benefit correctly to ensure deductibility and compliance with regulations like the Affordable Care Act (ACA).

Specific Plans and Accounts: HSAs, Medicare, and More

Deductibility extends to contributions for specific types of health accounts and plans. Contributions to a Health Savings Account (HSA) are tax-deductible (or pre-tax if through an employer) if you are enrolled in a qualifying High-Deductible Health Plan (HDHP). This creates a powerful triple tax advantage: contributions are deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Premiums for Medicare Parts B and D, and Medicare Advantage plans, along with Medigap policies, are also potentially deductible as medical expenses, subject to the 7.5% of AGI threshold. Furthermore, long-term care insurance premiums have age-based deduction limits, and COBRA premiums can be deducted if you are eligible to itemize and meet the medical expense threshold.

What You Cannot Deduct

Equally important is understanding what health insurance costs are not deductible. Premiums paid with pre-tax dollars through an employer-sponsored plan (via salary reduction) are not deductible because they were never included in your taxable income. You cannot double-dip. Payments for policies that provide reimbursement for loss of earnings or for a specific injury or disease are not deductible as medical expenses. Life insurance, disability insurance, and critical illness policy premiums are also non-deductible for medical expense purposes. Finally, if you are eligible to participate in an employer-subsidized health plan (either your own or your spouse’s) but choose to buy your own individual plan instead, those premiums are generally not deductible under the self-employed rules.

Frequently Asked Questions

Can I deduct health insurance premiums if I am unemployed?
Yes, but only if you itemize deductions and your total medical expenses, including premiums, exceed 7.5% of your AGI. The premiums must be paid with after-tax dollars. If you received unemployment benefits, your AGI includes those benefits, which may affect the threshold.

Are marketplace (ACA) premiums deductible?
Yes, premiums for plans purchased through the Health Insurance Marketplace are deductible as a medical expense if you itemize and meet the threshold. Furthermore, if you are self-employed, you can deduct them using the above-the-line self-employed health insurance deduction. It is important to note that if you receive a Premium Tax Credit (subsidy), you can only deduct the portion of the premium you pay out-of-pocket.

Can I deduct dental and vision insurance premiums?
Yes, premiums for qualifying dental and vision insurance are treated the same as medical insurance premiums for both the itemized medical expense deduction and the self-employed health insurance deduction.

Where do I claim the self-employed health insurance deduction?
You claim this deduction on Schedule 1 (Form 1040), Line 17. It is entered as an adjustment to income, so you benefit from it regardless of whether you take the standard deduction or itemize.

How do I prove my premium payments for tax purposes?
Keep all documentation, including Form 1095-A if you have a marketplace plan, annual statements from your insurance company showing total premiums paid, and bank statements or canceled checks showing your payments. For a detailed breakdown of plan costs, which can help in budgeting and tax planning, our analysis of Aflac health insurance costs, premiums, plans, and savings illustrates the type of information to track.

Successfully deducting health insurance premiums requires careful attention to your employment status, how premiums are paid, and which tax form to use. By identifying the correct deduction path, whether through itemizing, the self-employed deduction, or business expenses, you can transform a significant recurring cost into a meaningful tax saving. Always consult with a qualified tax professional to ensure your specific situation is handled correctly, maximizing your benefits within the legal framework.