Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Health insurance costs are deductible for all taxpayers
  • All taxpayers can deduct health expenses above the itemization threshold
  • Self-employed taxpayers can deduct health and other insurance premiums
  • Most taxpayers will not meet the ten percent threshold

The individual mandate requires that everyone get and keep qualified health coverage. For some persons, the total costs of health insurance are deductible from annual income taxes.

Other individuals can itemize medical expenses. Everyone can deduct some part of the expenses if the numbers fit the IRS rules. Comparison shopping is the ideal method for finding the best values in health insurance.

Use our free comparison tool today to find the health insurer that’s right for you.

The Tax Filing Threshold

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Persons that do not earn more than a set minimum do not have to file a return. They can choose not to file if their income is less than $10,150 for a single person.

Anyone that received a premium tax credit must file a return to reconcile the balance of tax credits used and due to the taxpayer. There are benefits to filing even if not required to do so. Many benefits depend on tax records to verify income.

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Itemization Thresholds

The Affordable Care Act made some tax code changes. One of the changes involved the minimum amount needed to deduct medical expenses.

Before the ACA, the threshold was seven and one-half percent; the law raised the bar to ten percent except for those above a certain age.

  • Seven and one-half percent for those 65 and older
  • Ten percent for all other taxpayers

The Standard Deduction

Health insurance is deductible if it exceeds ten percent of the annual income. The taxpayer can deduct amounts over ten percent of the annual family income.

One can deduct for medical expenses for self, dependents, and a spouse. The deductible items include the below-listed types of expenses:

  • Premiums paid from the taxpayer’s funds and not from an employer or from pre-tax income.
  • Out-of-pocket costs including deductibles, copays, and coinsurance.
  • Transportation to medical care and other incidental costs.

No Double Benefits

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The ACA offers many financial benefits to those that buy on the exchanges or through exchange-authorized brokers.

Items paid through these benefits can no longer get the standard deduction because that would be a double benefit; it would add the Affordable Care Act benefit to the tax code exception.

Below-listed items describe some prohibited double benefits.

  • premiums paid by advance tax credits
  • premiums paid by the employer through pre-tax funds
  • amounts paid or reimbursed by insurance
  • amounts paid into medical expense savings accounts

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Self-employed Health Insurance Deduction

The self-employed taxpayers can deduct the costs of their health insurance premiums.

This tax policy is a strong advantage for self-employed persons, and this deduction can transform a small business budget from a loss to profit.

Self-employed persons are both employee and business owner. They get the advantage of deducting health insurance premiums for health, dental, and vision coverage.

They can deduct premiums paid for a spouse and dependents for health, dental, and vision coverage.

Medicare and Deductions

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Medicare is health insurance within the Affordable Care Act. It meets the standards for qualified health plans. It has minimum essential coverage and offers ten essential health benefits.

The Medicare program uses private insurers as well as government contractors. The premiums paid to government and private insurers are deductible as well as expenses. The below-listed items describe deductions for Medicare premiums and costs.

  • Part A is generally not deductible. Persons that pay premiums for Part A may be able to deduct them as medical expenses. Persons that get Part A from qualified quarters of tax payments cannot deduct Medicare A premiums.
  • Part B premiums are deductible as are the expenses of outpatient care that Medicare does not pay. There is a typical twenty percent amount left unpaid by Medicare Part B. These deductions must qualify as medical expenses on the tax forms.
  • Part C Medicare Advantage has premiums paid to private insurers. These amounts and related out of pocket costs are deductible if paid by the taxpayer. They must meet the filing threshold and the itemization minimum to count towards reduced taxes.
  • Part D Prescription Drugs consists of private plans with monthly premiums. Members must handle copays and other incidental expenses. The premiums and related costs are deductible as medical expenses. They must qualify under the seven and one-half percent or ten percent threshold.
  • Medigap is Medicare Supplement that is designed primarily to fill gaps in payments left by Original Medicare. One can deduct the premiums for Medicare Supplement if the income qualifies under the ten percent or seven and one-half percent threshold for itemization.

Employer-sponsored Plans and Features

Many employees and retirees get employer-sponsored benefits such as partial premium payment and help with deductible expenses.

To the extent that the employer pays any cost, premium, or deductible expense, the taxpayer may not deduct those amounts.

The taxpayer can deduct the parts of any cost, premium or expense that they pay from their pockets without reimbursement.

Employees and retirees using Health Reimbursement Arrangements may not deduct amounts paid or reimbursed through these programs. They can deduct any non-reimbursed expenses.

Itemized deductions must meet the threshold, and only the amounts above the threshold will count as deductions.

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Deductible Health Insurance

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The costs of health insurance are deductible or everyone. Health insurance premiums and costs are deductible, subject to the itemization threshold.

Self-employed persons get a broad deduction, and it includes other insurance, spouse, and dependents. It is not easy or simple to understand and the federal government offers assistance.

Comparison shopping is an excellent tool for finding the best fit and greatest value in health insurance. Enter your zip code below to use our free comparison tool.