Are Health Care Premiums Tax Deductible? Many individuals purchasing their own health care coverage are unaware that some or all of their premiums could potentially be tax deductible, subject to certain limits and satisfying specific IRS regulations. Since tax rules pertaining to health care premiums can be complex, it would be a good idea to consult an experienced tax professional before trying to claim this expense on taxes.

In general, health care premiums paid with after-tax dollars may only be deducted as tax deductions. This rule precludes using employer-sponsored health care (in which premiums are payroll deducted and thus included in box 1 of your W-2), or Medicare Part A coverage via Social Security as these costs won’t be tax deductible.

Purchasers who purchase health insurance outside an exchange or who receive subsidies from such an exchange to offset the cost of premiums are subject to different rules than individuals; for individuals this only extends up to 7.5% of your adjusted gross income; self-employed people can deduct 100% as business expenses by itemizing and supporting all their deductions with adequate records of expenses incurred.

As a business owner, you may also deduct health insurance premiums paid on behalf of employees provided that you meet the necessary reporting and substantiation rules for your type of enterprise. For more information regarding these rules visit the IRS’s website including examples.

Tax rules for business owners can be more complex than those for individuals. For example, those owning corporations and partnerships must file Form 1040 with Schedule C to report insurance premiums paid out. Sole proprietorship owners can deduct health insurance premiums on Schedule C but it should be noted that rules about writing off this expense for sole proprietors differ significantly than for employees of corporations and partnerships.

As both an employer and employee, it’s essential to remember that the rules for deducting health insurance premiums can be intricate and ever-evolving. To make sure you get every deduction possible this year, consult a tax professional beforehand and discuss whether speaking to them may help make sure your deductions reach their fullest potential.

This article should only be used as general information and should not replace professional tax or legal advice. Always consult a specialist prior to making any decisions regarding your taxes or business. 2019 Allstate Communications LLC All rights are reserved; any reproduction, broadcasting, rewriting or redistribution without written permission by Allstate Communications is strictly forbidden; trademarks owned by Allstate Communications are owned by them as noted and for inquiries about this material please reach out at [email protected]