Are Health Insurance Premiums Tax-Deductible?

So, are health insurance premiums tax-deductible? The answer to this question depends on your employment status.

If you are self-employed or retired and over 65, then yes! You may be able to deduct your health insurance premium as an itemized deduction on Schedule A (Form 1040) if you itemize deductions.

For those who have employer-based coverage on the other hand, unfortunately no: premiums are not deductible by those who have employer-based coverage because the cost of the plan is included in their income and therefore listed as wages before taxes.

Understanding Health Insurance Premiums

Health insurance premiums are the payments made to an insurance company in exchange for coverage. They are usually paid by you, your employer, or both. Premiums may be paid monthly or quarterly.

Health insurance premiums can be deducted as an itemized deduction if they exceed 7.5% of your adjusted gross income, according to the IRS Tax Guide for Individuals 2018 (see Table 1 on page 51). If you don't itemize deductions and have a high income compared with other taxpayers in your same tax bracket, you might consider taking the standard deduction instead of deducting medical expenses directly from your taxes.

Health Insurance Premiums That Are Tax-Deductible

If you're self-employed and pay for your own health insurance premiums, or if you're an employee who pays for family coverage, those are tax-deductible.

The premiums you pay for yourself, your spouse, and dependents are all deductibles

If you don't have a spouse or dependent children but are buying medical coverage through the marketplace with your own income (not from a job), those premiums may be deductible as well

Premiums paid by self-employed people toward their own health insurance may also be deductible if they meet certain requirements; however, these deductions are only allowed when payments were made on behalf of an eligible individual who also had employer-sponsored coverage during part of the year.

Health Insurance Premiums That Aren't Tax-Deductible

You can't deduct the premiums you pay for:

Your employer's health insurance plan. This is because your employer is paying for it, not you.

Health insurance for someone other than yourself, your spouse, or your dependents (children under age 27), like aging parents who may need help with medical expenses. They wouldn't be considered dependent even if they live with you and depend upon your support, so they're out of luck here. Since these people are covered by their own employers' plans and are not included in yours, there's no way to write off the cost of that coverage on your taxes—even if they're very ill or would otherwise qualify as a dependent under IRS regulations!

What Medical Expenses Are Tax-Deductible?

In order to be tax-deductible, medical expenses must meet two criteria:

• The expenses must be incurred for the prevention or alleviation of a physical or mental defect or illness.

• The expenses must not have been reimbursed by insurance or another source.

• Out-of-pocket costs like deductibles, copayments, and coinsurance also count as medical expenses if they meet the first criterion.

Deducting Health Insurance Premiums

The amount of your premium that's tax-deductible depends on your employment status. If you're self-employed, you can deduct 100% of the cost of health insurance premiums paid for yourself, your spouse, and your dependents. If you're an employee, you can deduct the cost of premiums paid for yourself and your family, but not any portion paid by your employer.

Learn about what health insurance premiums are tax-deductible or not

As you can see, there are many different health insurance plans that are deductible. However, we have found that the majority of people who have a qualifying plan get their premiums refunded to them by their employer and thus do not actually receive a 1095-A form. In fact, if you file your taxes with Form 1040EZ or Form 4868 (a tax extension) then your premiums are never reported on any forms at all!

If you do receive a 1095-A from your insurer and want to claim it as a deduction on Schedule A of Form 1040, then please follow these steps:

• Ensure that the total amount paid in premiums exceeds 7.5% of your adjusted gross income (AGI). If not, then you cannot take this deduction at all.

• Deduct the amount of any Advanced Premium Tax Credits (APTCs) that were paid to your insurer on Form 8962. This is because APTCs is actually a refundable tax credit, not a payment made to your insurer.

• Add up all of the qualifying health insurance premiums paid by you and/or your family members, and enter this total on the line for "Medical expenses" on Schedule A of Form 1040.

Conclusion

Premiums for health insurance that are not obtained through an employer can be deducted as medical expenses on your taxes if they exceed 7.5% of your adjusted gross income. The deductible amount depends on your employment status, with self-employed individuals being able to deduct 100% of the premiums paid for themselves and their families. Keep in mind that most people who have a qualifying health insurance plan actually have the premiums refunded to them by their employer, so they do not need to file any additional paperwork come tax time. If you are unsure of whether or not your particular health insurance plan is tax-deductible, please contact Triton Health Plans or your insurer or speak with a qualified tax professional.