Are Healthcare Insurance Premiums Tax Deductible?
Between monthly premiums, high deductibles, and rising medical bills, healthcare expenses often feel overwhelming. While tax deductions can offer some relief, figuring out whether health insurance premiums qualify can be confusing since the rules vary depending on various factors ranging from whether you’re self-employed to whether you’ll claim the standard deduction or itemize. This article clarifies related rules and highlights opportunities to make your healthcare costs more tax-efficient.
Understanding tax-deduction basics
Before zeroing in on health insurance premiums, it’s useful to understand how tax deductions work. A tax deduction reduces your taxable income to subsequently lower the amount of income tax you owe. If you earn $70,000 annually and claim $10,000 in deductions, for example, your taxable income drops to $60,000. You can do so via two primary methods:
Standard deduction
This is a fixed amount the IRS allows most taxpayers to deduct without itemizing. For the 2025 tax year, the standard deduction is $15,750 for single filers, $31,500 for married couples filing jointly and $23,625 for head of household.
Itemized deductions
Rather than taking the standard deduction, you can add up eligible expenses such as mortgage interest, charitable contributions, and some medical costs; itemizing can save you money if your itemized deductions exceed the standard.
Health insurance premiums as medical expenses
The IRS defines “medical expenses” broadly, looping in costs related to disease diagnosis, mitigation, treatment, and prevention as well as payments for treatments impacting any part or function of the body. While health insurance premiums qualify under this definition, deductibility ultimately depends on how they’re paid and whether you qualify under IRS rules. In most cases, you cannot simply subtract the cost of premiums from your taxable income and must consider the circumstances of your coverage (e.g., employer-sponsored vs. self-employed).
Employer-sponsored health insurance
Most Americans procure health insurance via an employer, with premiums typically paid using pre-tax dollars—meaning your portion of the premium is deducted from your paycheck before income taxes are applied, providing an immediate tax benefit as you won’t pay federal income tax or Social Security/Medicare tax on premiums. You cannot, in turn, deduct these premiums again on your tax return. For example, if your employer deducts $300 a month from your paycheck for health insurance and applies it pre-tax, you’re already saving money since doing so reduces your taxable wages by $3,600 for the year (with no additional deduction allowed on your tax return). One exception? If your employer doesn’t use a pre-tax arrangement and you pay premiums with after-tax dollars, a less common situation giving you the means to deduct premiums as part of itemized medical expenses.
Self-employed health insurance deductions
The IRS allows self-employed individuals to deduct 100% of their health insurance premiums directly from income, even if they don’t itemize. This includes premiums for:
Medical insurance
Dental insurance
Long-term care insurance (up to IRS limits by age)
Coverage for spouses, dependents, and children under 27 (even those not listed as dependents on your tax return)
This deduction is available “above the line,” meaning it reduces your adjusted gross income (AGI) before other deductions are calculated and thus makes it more valuable than itemizing (as you receive the benefit even while taking the standard deduction). Limits do exist, however, as you cannot deduct more than the income you earn from self-employment. You also may not qualify if you’re eligible for an employer-subsidized plan (through your own job or your spouse’s).
Itemizing medical deductions
For employees or retirees who aren’t self-employed, health insurance premiums are still sometimes deductible as part of itemized medical expenses (with the IRS only allowing this for costs exceeding 7.5% of your AGI). If your AGI is $80,000, for example, you can deduct only the portion above $6,000 (7.5% of $80,000). If total medical costs including premiums, copays, prescription drugs, and procedures amount to $9,000, you can deduct $3,000. This threshold makes it difficult for many taxpayers to benefit—especially those who are relatively healthy and whose employer already covers most premium costs—yet the deduction can provide meaningful relief for people with significant medical bills or high insurance costs. Some households strategically “bunch” medical expenses into a single tax year to clear the threshold (e.g., if you need elective surgery and know you’ll exceed the threshold this year, you can schedule other treatments and pay outstanding medical bills before December 31 to maximize your deduction).
Health savings accounts (HSAs) and premiums
Another layer of complexity involves health savings accounts (HSAs), contributions to which are tax-deductible and can grow or be withdrawn tax-free for qualified medical expenses. Premiums are generally not considered qualified expenses, but there are a few exceptions:
COBRA premiums (temporary continuation of employer coverage after leaving a job)
Health coverage while receiving unemployment benefits
Medicare premiums (excluding Medigap policies)
Outside of these specific situations, you cannot pay health insurance premiums directly with HSA funds in the absence of penalties.
Medicare impacts
Medicare premiums add another wrinkle, with the IRS allowing some deductions as medical expenses in this case. For retirees, this means:
Part A (hospital insurance): This is typically not deductible as most people don’t pay premiums for this.
Part B (medical insurance): Premiums are deductible.
Part C (Medicare Advantage): Premiums are deductible.
Part D (prescription drug coverage): Premiums are deductible.
Medigap (supplemental insurance): This is deductible if you itemize but not payable with HSA funds.
These deductions are often especially valuable for retirees who itemize and have significant healthcare costs. In fact, many retirees eclipse the 7.5% AGI threshold due to rising healthcare needs, perhaps making itemizing that much more beneficial in retirement.
Long-term care insurance
The IRS allows deductions for long-term care insurance premiums but only up to certain limits based on age. For the 2025 tax year, maximum deductible amounts range from $480 for people under 40 to $6,020 for those over 70—with these premiums also in congruence with 7.5% AGI rule restrictions when deducted as medical expenses (though self-employed individuals can often deduct them “above the line” within the limits). Given rising long-term care costs (often $100,000+ annually for nursing homes), the ability to deduct even portion of premiums can ease the burden of planning for this expense.
Special situations
Deductibility rules shift in the following unique scenarios:
COBRA coverage
Premiums paid for COBRA continuation are generally deductible if you itemize and (as previously mentioned) sometimes payable with HSA funds.
Unemployment
Those unemployed and paying for health insurance may qualify to use HSA funds for premiums without incurring a penalty.
Premium tax credit
If you purchase health insurance through the Marketplace (healthcare.gov), you may qualify for a tax credit that will reduce your premium costs—but cannot claim both the credit and a deduction for the same premiums.
State taxes
Some states allow health insurance premium deductions even if the IRS does not, such as those giving you the means to deduct all premiums directly on your state tax return and thus enjoy additional savings. For many people, the self-employed health insurance deduction is the most direct and powerful way to lower taxes; for others (especially retirees with high medical costs), itemizing is best to unlock valuable savings. While premiums are often not deductible for those with employer-sponsored plans, pre-tax treatment already provides substantial tax benefits.
The takeaway on health insurance premiums
So, are health insurance premiums tax deductible? The short answer is sometimes, with deductibility depending heavily on your own unique employment situation, whether you itemize deductions, and the type of coverage you have. While the rules may seem daunting, understanding them can reveal opportunities to save money and better manage healthcare costs.
Unsure about your own eligibility? Consult with one of our tax professionals who can review your situation in detail, knowing a little planning can go a long way toward reducing your tax burden and making healthcare more affordable. Call us at 201-488-2828 or send an email to support@kaleedscpa.com to get started!
