You can claim self-pay health insurance premiums on your federal taxes based on your financial situation and how you get health insurance. If you have health insurance through your employer, you can’t claim what you pay in premiums because that amount is deducted from your paycheck before taxes.
Generally, you are allowed to deduct health insurance premiums from your taxes if the following apply to you:
The IRS allows you to select a standard deduction or itemize expenses when claiming tax deductions. Your filing option depends on how much you paid in expenses in the last year, including medical costs.
Is health insurance tax deductible?
Health insurance premiums are federal tax deductible in some cases, as these monthly payments are classified as medical expenses. Generally, if you pay for health insurance on your own, you can deduct the amount on your taxes. Your income and how you get your insurance help determine if costs are eligible for tax deductions.
Below are some typical sources of health insurance and tax guidance for each item.
self-employed health insurance deduction
If you are self-employed and have net earnings for the year, you can claim the health insurance premiums you pay for yourself, your spouse, and your dependents. This is a standard deduction for health insurance used to reduce your AGI. it is not a breakdown of overhead costs.
Do I take the standard deduction or do I itemize my expenses?
Whether you take the standard deduction or itemize it depends on your financial situation. choosing one or the other is not permanent; it can change each year when you file your tax return. To determine what would work best for you, we suggest you look at Schedule A (Form 1040). Add all eligible itemized expenses, including medical expenses, and compare that number to the standard deduction that would apply to you. If your itemized expenses add up to more than your standard deduction amount, you’d save money by taking the time to itemize them. You can also use this IRS tool to help you determine which medical expenses are deductible.
what if I qualify for federal premium subsidies?
You may qualify for an income-based premium subsidy, also called an advance premium tax credit (aptc), for coverage you purchased through the health insurance marketplace. Any premium you pay that is reimbursed by an APTC is not tax deductible. but any remaining premium can be deducted.
for example, let’s say your aptc is $300 and your tax return shows you can deduct $500 in premiums. in that case, you could claim the extra $200 on your return. If your eligible tax deduction is less than your APTC amount, the difference is subtracted from your refund or added to your balance due.
other tax-deductible medical expenses
The irs allows you to deduct medical expenses ordered by a doctor or health care professional. For a complete list of acceptable medical expenses, you can visit the irs.gov website. for tax year 2021, you can deduct the cost of personal protective equipment such as masks, hand sanitizer, and disinfecting wipes for the primary purpose of preventing the spread of coronavirus.
Other eligible medical expenses include:
Along with these out-of-pocket medical expenses, you can deduct travel expenses related to medical care. For example, to drive to a physical therapy appointment, you could deduct the cost of gas and oil as a medical expense.
Which medical expenses are not tax deductible?
Medical expenses that are otherwise reimbursed to you cannot be deducted. this includes premium tax credits, since these credits already reduce the amount you pay for health insurance.
Other non-deductible expenses include cosmetic expenses or procedures not related to your health, over-the-counter medications, and general health purchases such as toothpaste, vitamins, or diet foods.
methodology and sources
Insurance-specific data and definitions were obtained from cms.gov, while all tax-related data and definitions were obtained from irs.gov. we obtained expert comments directly from the respective industry experts.
