Can You Claim a Tax Deduction for Health Insurance?

We all know how expensive healthcare can be, so being able to claim a tax deduction for some of your insurance costs can help you save come tax time. Since there are specific rules and qualifications you must follow, here’s an overview of when you can and cannot claim a deduction on your health insurance.

When Health Insurance is Not Tax-Deductible

If you didn’t pay for health insurance, you can’t take a tax deduction for it. If your employer pays your health insurance premiums, you can’t deduct those costs. However, if an employer only pays for part of your premiums, you still may be able to claim a deduction for the portion you paid.

If you received a subsidy or premium tax credit to purchase a health insurance plan in the Health Insurance Marketplace, any advanced-payment subsidy that lowered the cost of your health insurance premiums cannot be claimed as a deduction. However, the money you paid out of your own pocket for your premiums might be tax deductible.

If you pay for health insurance with pre-tax money, you can’t take a deduction for health insurance. If you have insurance through your employer, the premiums you pay are usually taken out of your paycheck before you are taxed. Since these premiums are paid with pre-tax dollars, they’re already income-tax-free, meaning you can’t claim them as a tax deduction.

Also note, you cannot deduct health insurance unless you itemize your tax deductions or you are self-employed and have a net profit for the year. You don’t need to know if you qualify for itemized deductions, TurboTax will figure it out for you.

There Are Limits to the Amount of Your Health Insurance You Can Deduct When You Itemize. If you are able to write-off your health insurance, there are limits to how much of your premiums you can write off when you are not self-employed.

If you’re able to claim your health insurance as a medical expense deduction, you can only deduct medical expenses if you itemize your deductions and they exceed 7.5% of your adjusted gross income. If you’re self-employed and claimed the self-employed health insurance deduction, you don’t have to exceed the 7.5% threshold because you’re writing the premiums off as an adjustment to your self-employment income rather than as a tax deduction.

When Health Insurance is Tax-Deductible

If you’re self-employed, your health insurance premiums may be tax deductible. If you’re self-employed and not eligible for an employer-sponsored health plan through a spouse’s job, you may be eligible to write-off your health insurance premiums on your taxes. However, you can’t write off more in health insurance premiums than net profit you earned for the tax year.

Health insurance premiums paid with your own after-tax dollars are tax deductible. For example, if you purchased insurance on your own through a health insurance exchange or directly from an insurance company, the money you paid toward your monthly premiums can be taken as a tax deduction.

Generally, Medicare premiums can be tax deductible if you itemize your deductions and have qualifying medical expenses that exceed 7.5% of your adjusted gross income. 

If you’re self-employed, you might be able to deduct premiums for Medicare or other eligible health insurance from your income without having to itemize or meet the 7.5% threshold requirement.  If you qualify, you could deduct premiums for some Medicare plans that are tax deductible. This includes Medicare Part B and Part D prescription coverage.

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