If you’re self-employed
The self-employed health insurance deduction lets you deduct premiums for yourself, your spouse, and your dependents, including:
- Dental
- Vision
- Qualified long-term care insurance
Calculate the deduction using the Self-Employed Health Insurance Deduction Worksheet or Form 7206, depending on your situation, and report the total on Schedule 1. If you plan on deducting health insurance premiums against self-employed income, you can still include other out-of-pocket medical expenses on your itemized deductions, but you cannot also deduct health insurance premiums both against your self-employed income and in your itemized deductions. You can only choose one, even if you meet qualifications to do both.
Note: Your deduction can’t exceed your net self-employment income from the business under which the plan is set up. In other words, if your business is operating at a loss, you would be unable to claim the health insurance premium as a deduction on Schedule 1.
When you can’t claim this deduction as a self-employed filer
You might not be able to claim health insurance premiums on your taxes if you’re eligible to participate in a subsidized employer health plan for a month you’re claiming premiums for while trying to claim with self-employed income. Additionally, deductions for premiums on Schedule 1 will be limited to your qualified self-employed income available and cannot exceed that income.
If you’re a W-2 employee
Whether you can deduct health insurance premiums depends on the type of premium:
- Pretax payroll premiums: Not deductible, as it’s already excluded from your taxable income.
- After-tax premiums: Only deductible if you itemize and your total medical expenses exceed 7.5% of AGI
Because you can only deduct medical expenses that exceed 7.5% of your AGI, that means as your AGI and overall income increase, you would need to spend proportionally more on healthcare premiums and other out-of-pocket medical expenses.
To claim this deduction, total your after-tax premiums with other medical expenses on Schedule A. You’ll want to compare your itemized total to the standard deduction before you file.
When you can’t claim this deduction as a W-2 employee
You may not be able to claim health insurance premiums as part of the medical expense deduction on your taxes if you’re not itemizing your deductions, or if your health insurance premiums and out-of-pocket medical expenses added together do not exceed 7.5% of your AGI.
What about COBRA and Medicare premiums?
COBRA insurance premiums count as a qualifying medical expense for the itemized deduction the same as W-2 employees, even if you no longer have that job, just like other after-tax insurance costs. Medicare premiums work the same way for most employees. Additionally, if you’re self-employed, you can include Medicare premiums in the self-employed health insurance deduction instead.
