What Does My New Health Insurance Mean for My Taxes?

In an effort to keep health insurance premiums more affordable, switching policies has become practically an annual event. This is true with many employer-sponsored plans, but you might even make a switch to an individual plan.

Here’s what you need to know about the difference in health insurance plans before you file, and how you can potentially save on your taxes by claiming a deduction for premiums or your HSA contributions.

Key takeaways

• Your health insurance premiums may be able to save you money on your taxes by taking advantage of a deduction for your premium.
• An HSA can directly reduce your taxable income because contributions are generally made through your employer during the payroll process, pre-tax.
• In addition to insurance premiums, other medical expenses, like prescription medications, may also be deductible when you file your return.

What effect will new health insurance have on my taxes?

It all depends on what type of plan you’ve selected, as well as whether or not you have an employer-sponsored plan or an individual plan.

An employer-sponsored health insurance plan

One of the basic advantages of having an employer-sponsored health insurance plan is that the premiums are typically paid with pre-tax dollars. This results in a reduction to your taxable income.

For example, if you earned $50,000 in wages from your employer and contributed $5,000 toward your health insurance premium, your income for federal tax purposes will be reduced to $45,000.

If you’re in the 12% tax bracket, this will result in a $600 reduction in your federal income tax. That doesn’t come close to offsetting the cost of your contribution, but it gives you some tax relief.

With most plans, the employer pays part of the premium. That portion of the premium has no tax consequences for the employee but is a deduction for the employer.

An individual health insurance plan

If your employer doesn’t provide a health insurance plan, you can get coverage either on your state health insurance exchange or on healthcare.gov by the December 15 open enrollment deadline.

If you have to go this route, there are two ways you may get a tax break.

Health insurance premium tax credit

If you purchase health insurance in your state marketplaces or healthcare.gov, you may be entitled to the premium tax credit (PTC)to help you pay for health insurance.

There are a series of eligibility criteria for the premium tax credit, but the main one is based on your income. To be eligible, your household income must be at least 100% but not more than 400% of the federal poverty level.

Claim the premiums as an itemized deduction

To the extent your premiums exceed 7.5% of your adjusted gross income (AGI), you can claim them as part of itemized deductions as medical expenses. However, if you are in an employer-sponsored plan, your premiums are already reducing your taxable income and cannot be separately deducted as an itemized deduction.

For example, if your adjusted gross income is $100,000, and you paid $20,000 in health insurance premiums, you’ll be able to claim  $12,500 of that amount toward your itemized deductions. That’s calculated by $20,000 – ($100,000 X 7.5%).

Be aware that you can typically deduct the higher of your itemized deductions or your standard deduction. For 2025, the standard deduction was increased to $15,570 for single filers ($14,600 for 2024), $23,625 for head of household ($21,900 for 2024), and $31,500 for those married filing jointly ($29,200 for 2024). When preparing your tax return, TurboTax will let you know what the most tax-advantageous option would be for your specific situation.

If you’re self-employed, you can deduct your health insurance premiums paid on Schedule 1, and you don’t have to itemize your deductions or meet  the 7.5% of AGI  requirement.

Impact of a Health Savings Account (HSA)

You may be considering a Health Savings Account (HSA) as a direct result of the increase in health insurance deductibles in recent years. HSAs can partially offset your out of pocket medical expenses.

A high deductible health insurance plan (HDHP) is required to enroll in an HSA.. An HSA can help you build up cash reserves to cover the high deductible, and you get a tax break on your contributions.

For 2025, you can contribute up to $4,300 for yourself ($4,150 for 2024) or $8,550 if you have coverage for your family ($8,300 for 2024). At age 55 and older, individuals can contribute an additional $1,000.

Taxpayers must be enrolled in a high deductible health plan (HDHP) in order to qualify for an HSA. There are specific limits on both the deductibles and out-of-pocket maximums on your basic health insurance:

• For self-only plans, the maximum out-of-pocket is $8,300 with a minimum deductible of $1,650 for 2025 ($8,050/$1,600 for 2024)
• For family coverage plans, the maximum out-of-pocket is $16,600 with a minimum deductible of $3,300 ($16,100/$3,200 for 2024)

HSAs are an excellent way to balance higher deductibles and out-of-pocket costs with a reduced-cost basic health insurance premium.

Generally, unspent funds can remain in an HSA from one year to another. HSA funds can pay for medical expenses such as deductibles, copayments, and other healthcare costs. They can even be used to cover some costs not traditionally covered by insurance, like some over the counter medications and supplies.

HSA contributions reduce taxable income

If your HSA contributions are made through your employer’s payroll, your HSA contributions will be deducted from your taxable income at the time of payroll processing. If you make HSA contributions directly, contributions can be taken as “above-the-line deductions”. So, even if you take the standard deduction, you can claim this tax benefit to help you save.

If you’re planning on deducting HSA contributions, keep in mind that the amount you can write off is based on how many months you were enrolled in the plan. So, if you only had an HSA for part of the year, you’ll have a lower deduction.

Additionally, any excess contributions (those over the deductible limit) made by either you or your employer will be considered taxable income when you file your return. Those that are made via a cafeteria plan may also be subject to a 6% excise tax. To avoid this, you can withdraw excess contributions before the tax filing deadline (April 15 or the next business day).

OBBBA updates that affect HSAs

When the One Big Beautiful Bill Act (OBBBA) passed in July 2025, it expanded HSA eligibility to allow HDHP insurance to pay for telehealth services before the deductible has been met again. The update applies to future telehealth services, as well as retroactively. This means that it applies to the 2025 tax year.

Beginning in 2026, individuals with Bronze-level plans will also gain access to HSAs even if the plans don’t meet the other criteria.

Additionally, those who participate in primary care service agreements will be eligible to contribute to HSAs starting in 2026.  They will also be able to pay the direct primary care services fees with HSA dollars.

What other medical expenses can help me save on my taxes?

In addition to your insurance premiums and HSA contributions, you may be able to write off:

• Prescription medications
• Dental insurance
• Medicare A (if enrolled voluntarily), Medicare B, and Medicare D insurance
• Long-term care insurance (limits apply based on your age)

You can’t deduct medical costs reimbursed by your HSA, FSA, or any other tax-advantaged medical savings account or health insurance plan.

No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.