Health insurance is one of the biggest expenses for individuals and families in America. The good news? In many cases, health insurance premiums are tax deductible — meaning you could lower your taxable income and save money.
In this guide, we’ll break down when health insurance premiums are deductible, who qualifies, and where you can get more information directly from trusted government sources.
✅ Who Can Deduct Health Insurance Premiums?
1. Self-Employed Individuals
If you are self-employed (freelancer, gig worker, business owner), you can deduct 100% of your health insurance premiums from your taxable income.
✅ Good to know: This applies whether you itemize deductions or not.
✅ Includes: Coverage for yourself, your spouse, your dependents, and children under age 27 (even if they aren’t dependents).
Example:
Sarah runs an online business. She pays $450 per month for health insurance.
➡️ At the end of the year, she deducts $5,400 ($450 × 12 months) from her taxable income, reducing her tax bill.
2. Employees (W-2 Workers)
For employees, the rules are a little different:
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If you pay for health insurance pre-tax through your employer’s payroll deductions → You cannot deduct it (the benefit is already applied).
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If you pay after-tax premiums, you may deduct medical expenses — including premiums — that exceed 7.5% of your Adjusted Gross Income (AGI) and only if you itemize deductions.
Example:
John is a full-time employee earning $60,000 annually. His after-tax medical expenses (including premiums) total $7,000.
➡️ 7.5% of $60,000 = $4,500.
➡️ John can deduct $2,500 ($7,000 - $4,500) if he itemizes.
3. Small Business Owners
If you own a small business (LLC, S-Corp, etc.), you may be able to deduct health insurance premiums as a business expense for yourself and your employees.
⚠️ Rules vary depending on your business structure — consult a tax professional.
✅ What Medical Expenses Count Toward Deduction?
✅ Health insurance premiums
✅ Dental insurance premiums
✅ Vision insurance premiums
✅ Long-term care insurance (with limits)
✅ Out-of-pocket costs like copays, prescriptions, and medical devices
✅ Where to Get More Reliable Information
Here are trusted, up-to-date resources directly from U.S. government sources:
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📌 IRS Official Guide on Medical Expenses (Publication 502):
👉 https://www.irs.gov/pub/irs-pdf/p502.pdf -
📌 Self-Employed Health Insurance Deduction Explained by IRS:
👉 https://www.irs.gov/taxtopics/tc502 -
📌 IRS Interactive Tax Assistant - Can I Deduct My Medical Expenses?:
👉 https://www.irs.gov/help/ita/can-i-deduct-my-medical-and-dental-expenses
🟢 Final Thoughts
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✅ Self-employed? You can almost always deduct premiums — big savings!
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✅ Employee? You may benefit if you have high medical expenses and itemize.
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✅ Business owner? Explore options to deduct as a business expense.
Pro Tip: Always keep receipts of your premiums and medical expenses and consult a tax professional or certified accountant for personalized advice.
💡 Knowledge is power — understanding these deductions could save you hundreds or even thousands of dollars a year.
