Is private health insurance tax-deductible?

Is private health insurance tax deductible? Yes, as long as you spend more than 7.5% of your income on medical expenses.

Most private health insurance costs you pay out-of-pocket are tax-deductible, but some restrictions apply.

These restrictions mainly depend on whether you’re self-employed, eligible for coverage with your employer, or have an HSA. Health insurance tax deductions will also depend on whether you qualify for government subsidies with a marketplace plan.

As a rule, remember that any insurance premiums paid pre-tax from your paycheck are not tax-deductible. That’s because anyone with an employer-sponsored health plan is already getting the best health insurance quotes.

However, if you don’t have coverage through work, you could be eligible for a deduction to help mitigate the more expensive rates. 

Is private health insurance tax-deductible? Keep reading to find out, or enter your ZIP code to start comparing private health insurance quotes from local companies for free.

Is private health insurance tax-deductible?

The short answer is yes, a health insurance tax deductible is available for private health insurance when it’s paid out-of-pocket. This includes premium payments and any other medical expense payments that were not covered by the insurance company or paid pre-tax.

However, if you’re enrolled in an employer-sponsored insurance plan (also known as voluntary health insurance), your premiums are already tax-free and not eligible for further deduction.

What insurance premiums are tax-deductible?

Are insurance premiums tax deductible? Private health insurance premiums paid out-of-pocket are tax-deductible. If you have COBRA or Medicare Parts B and D, you can apply this deduction directly to your income. See more in our article Are Medicare premiums tax deductible?

Is health insurance deductible for self-employed? Yes, if you’re self-employed, you can also get this deduction. Find out details in our article Can a statutory employee deduct health insurance premiums?

However, if you qualified for any government subsidies from the health insurance marketplace and applied that amount to your premiums, then that amount is not tax-deductible. Only the amount you paid out-of-pocket can be claimed on your taxes.

If you’re insured through an employer, your premiums may not be tax-deductible, but your medical expenses are.

What medical expenses are tax-deductible?

Both employer-sponsored and individual health insurance costs are tax-deductible when medical expenses are paid out-of-pocket. This includes any deductibles and procedures not otherwise covered by your health insurance policy. 

Typically, the following medical expenses are tax-deductible:

• Payments to doctors and specialists
• In-patient and out-patient hospital care
• Rehabilitation
• Nursing homes
• Payments for prescription medications and treatments
• Prescribed weight-loss programs
• False teeth
• Eyeglasses
• Contact lenses
• Wheelchairs
• Transportation costs to medical care facilities

Deductions can vary based on what kind of private health insurance plan you carry. For example, you may have an HMO plan that does not offer out-of-network coverage. But if you went out-of-network for specialist coverage, you would qualify for deductions on those out-of-pocket payments.

Read more: What does health insurance cover?

What type of health insurance is not tax-deductible?

Remember that any health coverage you do not pay for directly is not tax-deductible. Furthermore, any coverage you pay for pre-tax is also not eligible for deduction. This means that the premiums you pay to an employer-sponsored health plan cannot be deducted from your taxes.

If you’re enrolled in Medicare, you cannot claim your Part A payments on your taxes. However, payments for Parts B and D are still eligible for deduction.

How do I deduct private health insurance premiums from my taxes?

Before you start deducting health insurance premiums, confirm how much you spent on medical expenses. Private health insurance is not tax-deductible unless you spend more than 7.5% of your income.

For example, if you make $100,000 per year and spend $10,000 on medical expenses, you could deduct $2,500 from your income when filing taxes that year.

You have two options when it comes to deducting private health insurance premiums from your taxes — standard or itemized deductions. Which one you choose will depend on your income and how much you spent on healthcare that year.

In general, standard deductions are the easiest and fastest way to file health insurance deductions, especially if you don’t have any expensive medical costs. The following is the standard deduction amount based on your filing status:

• $25,100 for married couples filing jointly
• $12,500 for individuals
• $18,800 for heads of households

If you believe you spent this amount or less on medical expenses, then it would be safe to use a standard deduction. However, if you spent more or believe your other deductions combined with your medical expenses will exceed the standard amount, take the time to make an itemized deduction. 

Each itemized expense must be listed on your Schedule A Form 1040. This can seem tedious, but itemized deductions reduce your overall income. It will be worth it if you pay significant medical costs out-of-pocket.

Read more: What shows up on a health insurance bill?

How much does private health insurance cost?

How much does private health insurance cost? Private health insurance rates average $450 per month or $5,400 per year. 

Your health insurance rates will depend on where you live and work, as well as your medical history, age, and gender. Take a look at the table below to see what factors will impact your private health insurance premiums:

Health Insurance Classifications

Private health insurance companies also offer different rates for different types of health insurance plans. For example, you will pay higher rates for a preferred provider organization (PPO) that lets you choose your doctors, as opposed to a health maintenance organization (HMO) that won’t.

To get the best rates, start comparison shopping online with different companies to see what’s available in your state. Also, see other tips on how to get cheap private health insurance and how to pick the best health insurance.

Some health insurance companies offer incentives for healthy living, including gym memberships, that can reduce your rates, so it pays to shop around. Some gyms even have partnerships with health insurance companies so that they can incentivize exercise and other healthy choices for their shared customers.

The best gym management software even makes it easy for gyms to process payments with Health Savings Account cards for eligible expenses (typically a gym membership is not HSA eligible unless ordered by a doctor or other medical professional, but other types of fitness and health expenses may be). 

Start shopping for free private health insurance quotes today with our free tool. Just enter your ZIP code to get free quotes from local companies in your neighborhood.

We hope we have provided answers to your questions such as, “Is health insurance tax deductible?”, “Are health insurance premiums tax deductible?” and “Is health insurance deductible for self-employed?”. If you’re wondering, “Is insurance tax deductible?” when it comes to other types of insurance, see our articles Are auto insurance premiums tax deductible? and What are the tax rules around life insurance?

Case Studies: Private Health Insurance Tax Deductibility

Case Study 1: John’s Private Health Insurance Deductions

John, a self-employed individual, is enrolled in a private health insurance plan. He pays his premiums out-of-pocket and wants to know if they are tax-deductible.

After consulting with a tax professional, John learns that his private health insurance premiums are indeed tax-deductible since he is not eligible for coverage through his employer. He keeps track of his expenses and includes the deduction when filing his taxes, helping him reduce his overall taxable income.

Case Study 2: Sarah’s Employer-Sponsored Health Plan

Sarah works for a large company that provides an employer-sponsored health plan. She wonders if the premiums she pays for her coverage are tax-deductible. However, she discovers that premiums paid pre-tax through her employer’s plan are not eligible for further deductions.

Sarah learns that while her premiums may not be tax-deductible, she can still claim tax deductions for her out-of-pocket medical expenses that are not covered by the insurance plan.

Case Study 3: Mark’s Marketplace Plan and Government Subsidies

Mark, a self-employed individual, purchases his health insurance through the marketplace and receives government subsidies to help with his premiums. He wants to know if his private health insurance premiums are tax-deductible.

After researching the rules, Mark finds out that only a portion of his premiums paid out-of-pocket is eligible for tax deductions. The subsidies he receives from the government cannot be claimed as deductions. Mark ensures he keeps track of his out-of-pocket expenses to maximize his tax deductions.