Health insurance premiums can represent a significant expense for individuals and families. While many taxpayers hope to reduce their tax bill by deducting these premiums, the rules around what qualifies and what doesn’t can be complex. The IRS allows deductions for certain health insurance premiums under specific conditions, usually when itemizing deductions or if you are self-employed. This blog provides a comprehensive overview of when you can deduct health insurance premiums on your federal tax return in 2025, and which types of premiums do not qualify.
Can You Deduct Health Insurance Premiums?
Yes, health insurance premiums can be deductible—but only in certain situations. Generally, they fall into two categories of deductibility:
- As a medical expense on Schedule A (if itemizing)
- As an “above-the-line” deduction if you are self-employed
Whether or not you can deduct your premiums depends on how the insurance was paid, your employment status, and whether you choose to itemize deductions instead of taking the standard deduction.
Deducting Premiums on Schedule A
If you itemize your deductions using Schedule A, you can include unreimbursed medical expenses, including qualifying health insurance premiums. However, they are subject to the 7.5% of adjusted gross income (AGI) threshold. This means that only the portion of your total medical expenses—including premiums—that exceeds 7.5% of your AGI is deductible.
Example:
- AGI: $80,000
- Health insurance premiums paid: $5,000
- Other medical expenses: $4,000
- Total medical expenses: $9,000
- 7.5% of AGI: $6,000
- Deductible amount: $9,000 – $6,000 = $3,000
So in this example, you would only be able to deduct $3,000 of your medical expenses on Schedule A.
Deducting Premiums If You’re Self-Employed
Self-employed individuals can deduct health insurance premiums “above the line” on Form 1040. This means you do not need to itemize to claim the deduction, and it directly reduces your AGI. This deduction applies to premiums paid for:
- Yourself
- Your spouse
- Your dependents
- Your children under age 27 at the end of the year, even if they are not your dependents
To qualify:
- You must have a net profit from self-employment.
- You cannot be eligible for other health coverage, including through a spouse’s employer.
This deduction is limited to the amount of your self-employment income. If your self-employment income is less than your premium payments, your deduction is capped accordingly.
Premiums That Qualify for Deduction
The IRS considers the following types of health-related insurance premiums deductible if they are paid out-of-pocket and not through a pre-tax plan:
- Health insurance (individual or family plans)
- COBRA premiums
- Medicare Part B, Part D, and Medicare Advantage (Part C) premiums
- Dental insurance premiums
- Vision insurance premiums
- Qualified long-term care insurance (within annual limits)
All of the above are eligible as medical expenses on Schedule A. For self-employed individuals, the health, dental, and vision premiums may also be claimed as an above-the-line deduction.
Premiums That Do Not Qualify for Deduction
There are several types of premiums that are not deductible, even if paid out of pocket:
- Premiums paid through an employer-sponsored plan with pre-tax dollars
- Premiums paid by your employer or reimbursed through a health reimbursement arrangement (HRA)
- Premiums paid using funds from a Health Savings Account (HSA) or Flexible Spending Account (FSA)
- Life insurance or income protection insurance premiums
- Gap insurance, such as accident or disability insurance
- Cosmetic surgery coverage unless medically necessary due to a condition or trauma
It’s essential to distinguish between post-tax and pre-tax premiums. If your premiums are deducted from your paycheck before taxes (as part of a cafeteria plan), you have already received a tax benefit and cannot deduct them again.
What About Marketplace Premiums (ACA Plans)?
If you purchase health insurance through the Health Insurance Marketplace (Obamacare), you may qualify for a Premium Tax Credit. This credit reduces your out-of-pocket premium costs. Any portion of your premium paid out-of-pocket (after applying the credit) may be deductible as a medical expense on Schedule A, provided you meet the 7.5% AGI threshold.
Long-Term Care Insurance Premium Limits for 2025
Premiums for qualified long-term care insurance are deductible but subject to age-based annual limits that are adjusted for inflation each year. For 2025, the maximum deductible amounts are:
- Age 40 or under: $470
- Age 41 to 50: $880
- Age 51 to 60: $1,770
- Age 61 to 70: $4,720
- Age 71 and over: $5,960
These limits apply per person and only if the policy is considered tax-qualified by the IRS.
How to Document and Report Premium Deductions
Proper documentation is critical. Maintain clear records including:
- Invoices or statements from your insurance provider
- Proof of payment (bank statements, credit card receipts)
- Employer documentation if paying through COBRA
- For Medicare, SSA Form SSA-1099 showing your Part B and Part D premiums
On your tax return:
- Report itemized premiums on Schedule A, Line 1 (if itemizing)
- Report self-employed health insurance deduction on Schedule 1, Line 17 of Form 1040 (for self-employed)
When Is It Better to Take the Standard Deduction?
If your total itemized deductions (including medical expenses) are less than the standard deduction for 2025, it’s usually better to take the standard deduction:
- $15,750 – Single or Married Filing Separately
- $31,500 – Married Filing Jointly
- $22,050 – Head of Household
However, self-employed taxpayers can still deduct qualifying premiums even if they claim the standard deduction because the self-employed deduction is “above-the-line.”
Conclusion
Health insurance premiums can be a valuable tax deduction, but only if you meet specific criteria and understand which premiums qualify. If you’re itemizing deductions, you can include qualified medical premiums that exceed 7.5% of your AGI. If you’re self-employed, you may be eligible to deduct 100% of your premiums as an adjustment to income. However, premiums paid through pre-tax employer plans or reimbursed through other means are not deductible again.
Keeping organized records and understanding how different types of health insurance plans are treated for tax purposes is essential. When in doubt, consult IRS Publication 502 or a trusted tax professional to ensure you’re maximizing your deductions within the law.
