Health Insurance Tax Deduction: Can You Write It Off?

Tax season brings plenty of questions, and one of the most common involves health insurance. You might be wondering whether those premium payments you make each month can reduce your tax bill. Can health insurance be deducted from taxes? The short answer is yes, but the rules depend on your employment status and how you pay for coverage.

Let's break down exactly when you can claim a health insurance tax deduction and how to maximize your savings.

Who Can Deduct Health Insurance Premiums?

Health insurance premiums are tax-deductible for many Americans, though the method and eligibility vary. Self-employed individuals often have the most straightforward path to this deduction. Employees who itemize their taxes may also qualify, but with more restrictions.

According to IRS Publication 502, you can include amounts paid for insurance premiums covering medical care or qualified long-term care in your deductions. You can deduct on Schedule A only the part of your medical and dental expenses that exceeds 7.5% of your adjusted gross income. The specific rules differ based on your situation, so understanding which category you fall into matters.

Self-Employed Individuals

If you run your own business, you may be eligible to deduct 100% of your health insurance premiums. The IRS allows self-employed workers with a net profit for the year to write off premiums for medical insurance, dental insurance, qualifying long-term care insurance, and coverage for spouses and dependents.

What makes this particularly valuable as a health insurance tax deduction is that it's an above-the-line adjustment to income. You don't need to itemize your deductions to claim it. The deduction lowers your adjusted gross income, which can also help you qualify for other tax benefits throughout the year.

Employees Who Itemize

For employees who itemize deductions, the path to tax write-offs for health insurance is narrower. You can deduct medical and dental expenses, including health insurance premiums, only to the extent these expenses exceed 7.5% of your adjusted gross income.

For example, if your AGI is $60,000, you can only deduct medical expenses beyond $4,500. Most Americans don't meet this threshold in a typical year. However, if you've experienced significant health events or have chronic conditions requiring ongoing care, itemizing may benefit you.

What Health Insurance Costs Cannot Be Deducted?

Understanding what you cannot deduct is just as important as knowing what qualifies for tax write-offs for health insurance.

If your employer pays your health insurance premiums, you cannot deduct those costs. When an employer pays only part of your premiums, you may still claim a deduction for the portion you paid out of pocket. Any medical expenses you receive reimbursement for, whether through insurance or your employer, cannot be deducted either.

You also cannot include health insurance premiums paid by or through the premium tax credit in your medical expense deduction. Medical expenses paid using money from a flexible spending account or health savings account are not deductible since those contributions are already tax-advantaged.

How Employer-Sponsored Insurance Affects Tax Benefits

Most Americans receive health coverage through their employer, which offers significant tax advantages. When your employer pays for your health insurance, that compensation is excluded from your taxable income. You receive the benefit of health coverage without paying income tax on its value.

This tax exclusion makes employer-provided coverage valuable for employees. However, it also means you cannot double-dip by claiming additional deductions on premiums your employer already paid on your behalf. The question of can health insurance can be deducted from taxes gets complicated when employer contributions are involved.

Alternative Approaches: ICHRA for Flexible Benefits

For small and medium-sized businesses, traditional group health plans can be expensive and complicated. An Individual Coverage Health Reimbursement Arrangement offers a tax-advantaged alternative that benefits both employers and workers.

With an ICHRA, employers reimburse employees for individual health insurance premiums. Those reimbursements are tax-deductible for the employer, and employees receive them tax-free. The money does not count as taxable income on W-2s. For startups and growing companies, this approach provides meaningful health insurance tax deduction benefits while giving employees flexibility to choose their own coverage.

Maximizing Your Health Insurance Tax Savings

Getting the most from health insurance tax deductions requires planning. Keep records of premiums, copays, prescriptions, and other qualifying costs throughout the year. Before deciding to itemize, calculate whether your medical expenses exceed 7.5% of your AGI.

Use tax-advantaged accounts wisely by contributing to HSAs and FSAs to reduce taxable income, but remember that those expenses cannot be double-counted as deductions. If you're close to the 7.5% threshold, scheduling elective procedures in the same year as other major expenses may help you qualify for the deduction.

How Venteur Simplifies Health Benefits

At Venteur, we provide a streamlined ICHRA platform for brokers and employers looking to offer flexible, tax-advantaged health benefits. Our solution allows you to reimburse employees for individual health insurance premiums while maintaining full regulatory compliance across all 50 states.

The employer experience integrates seamlessly with your payroll systems, and employees get personalized plan options that fit their unique needs. With no setup fees or monthly minimums, we make it easy for companies of all sizes, from enterprise organizations to growing teams, to provide meaningful health benefits that deliver real tax advantages for everyone involved.

Making Tax Season Simpler

Health insurance premiums can indeed be written off on your taxes, but the rules vary based on your employment status and how you pay for coverage. Self-employed individuals have the clearest path to deductions, while employees need to itemize and exceed the 7.5% AGI threshold. For employers seeking tax-advantaged ways to offer health benefits, solutions like ICHRA provide flexibility and savings for both the company and its workforce.