Is health insurance tax deductible?
The answer depends on your employment status and how you file your taxes.
Health insurance can be one of your largest annual expenses, especially if you’re self-employed or don’t receive coverage through an employer. In this guide, you’ll learn who qualifies, what expenses count, and how to claim these deductions correctly.
When Is Health Insurance Tax Deductible?
Are health insurance premiums tax deductible if you’re self-employed?
Absolutely, if you meet certain IRS requirements, you can deduct 100% of your premiums, even without itemizing.
Health insurance is tax-deductible when certain IRS conditions are met, most commonly for self-employed individuals who pay their own premiums.
If you qualify, this deduction can reduce your adjusted gross income (AGI), helping you pay less in taxes overall.
Understanding the Self-Employed Health Insurance Deduction
This deduction is an “above-the-line” deduction, meaning it reduces your adjusted gross income (AGI) directly, which can lower your overall tax liability.
Eligibility Criteria:
- You must have a net profit from self-employment.
- You cannot be eligible for other health insurance coverage, such as through a spouse’s employer.
- The deduction cannot exceed your earned income from the business under which the insurance plan is established.
It’s important to note that if you receive a premium tax credit for purchasing insurance through the Health Insurance Marketplace, you must reduce your deduction by the amount of the credit received.
Deducting Medical and Dental Expenses
Beyond premiums, you can deduct unreimbursed medical and dental expenses that exceed 7.5% of your AGI if you itemize deductions.
Deductible expenses include:
- Doctor’s visits and treatments
- Prescription medications
- Medical equipment and supplies
- Transportation to medical appointments
For a comprehensive list of deductible medical expenses, refer to IRS Publication 502.
These additional medical costs can sometimes push you past the threshold required to make your health insurance tax deductible, especially if you itemize deductions and track every eligible expense.
Health Sharing Plans and Tax Deductions
Health sharing plans can significantly lower your monthly health costs, but they’re not considered tax-deductible for individuals.
The IRS does not classify health sharing contributions as qualified health insurance under the ACA, so you can’t deduct them as a personal medical expense.
However, business owners have a limited deduction opportunity:
- If your business contributes to a health sharing plan for employees, those contributions may be deducted as an ordinary business expense.
- These payments must be reported as taxable income to the employee—unlike traditional health insurance, which is usually tax-free to the employee.
- If you’re a business owner-employee and offer the same benefit to your staff, you may be able to deduct your own contribution under business expenses.
While you may not get a tax break as an individual, many find the lower monthly costs of health sharing plans still offer strong value—especially for those in good health.
Do Small Businesses Get a Tax Credit for Offering Health Insurance?
Yes, small businesses that meet certain requirements can qualify for a health insurance tax credit of up to 50% of the premiums they pay for employee coverage through a SHOP (Small Business Health Options Program) plan.
To be eligible in 2025, your business must:
- Have fewer than 25 full-time employees (or equivalent)
- Pay average annual wages of $56,000 or less
- Cover at least 50% of employees’ health insurance premiums
- Offer a qualified SHOP plan to all full-time employees
You don’t need to offer coverage to part-time workers or their dependents to qualify.
The smaller your business, the larger the potential credit. Businesses with fewer than 10 employees and average wages under $27,000 may receive the full 50% credit.
This credit can help offset the cost of offering benefits, making it easier for small employers to compete with larger companies in attracting and retaining talent.
For more information, visit the IRS Small Business Health Care Tax Credit page.
Long-Term Care Insurance Premiums
Are health insurance premiums tax-deductible when it comes to long-term care?
If you’re self-employed, the answer is yes up to age-based annual limits set by the IRS. These deductions are considered part of the self-employed health insurance deduction and apply even if you don’t itemize.
For 2025, the maximum deductible amounts are:
- $470 for ages 40 or younger
- $880 for ages 41–50
- $1,760 for ages 51–60
- $4,980 for ages 61–70
- $5,960 for ages 71 and older
To qualify, the policy must meet IRS requirements for long-term care coverage. Keep in mind, these amounts represent the maximum deduction per person, so if you’re covering a spouse or dependent, their age determines their cap.
Compare Pricing on the Best HealthShare Plans Available
Maximize Your Tax Savings With the Right Coverage
Navigating what makes health insurance tax-deductible doesn’t have to be confusing.
Whether you’re self-employed, running a small business, or exploring affordable alternatives like health sharing, knowing what’s deductible and what’s not can lead to real savings at tax time.
The best part? You don’t have to figure it out alone. At HSA for America, we are here to help. We’ll walk you through your options, explain how different plans impact your taxes, and match you with a solution that fits your budget and your goals.
Talk to one of our Personal Benefits Managers today and get expert help choosing the right health coverage for 2025 and beyond.
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