Paul Sanchez
The cost of insurance premiums and many medical expenses may be tax-deductible, but only if they meet certain criteria. The IRS allows you to deduct unreimbursed payments for preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care. However, you can't include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction.
| Characteristics | Values |
|---|---|
| Can insurance payments count toward medical tax deduction? | Yes, if they are unreimbursed expenses that are more than 7.5% of your Adjusted Gross Income |
| What are some examples of unreimbursed expenses? | Preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care |
| What if I have insurance through an employer-sponsored plan? | You can't deduct your monthly premiums, but you can deduct out-of-pocket premiums, provided you don't use an HSA to cover those costs |
| What if I have insurance through COBRA? | You can deduct the premiums because you pay them out of your own pocket, but only if you itemize deductions and if your total medical expenses exceed 7.5% of your adjusted gross income for the year |
| What if I have insurance through the Health Insurance Marketplace? | You can deduct the full cost of your health care premiums from your taxable income, even if you don't itemize your taxes |
| What if I'm self-employed? | You may be eligible for the self-employed health insurance deduction for premiums you paid on a health insurance policy covering medical care for yourself, your spouse, your dependents, and your child under 27 |
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What You'll Learn
Self-employed health insurance deduction
Self-employed individuals can benefit from a self-employed health insurance deduction, which allows them to deduct the health insurance premiums they pay to offset medical expenses. This deduction is applicable if you have a qualifying insurance plan and are eligible as a self-employed individual. Eligible health insurance includes medical insurance, qualifying long-term care coverage, and all Medicare premiums (Parts A, B, C, and D).
If you are self-employed and have a net profit for the year, you may be able to deduct the premiums you pay for medical, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. This deduction is an adjustment to income, rather than an itemized deduction, and can be entered on Part II of Schedule 1. It is then transferred to page 1 of Form 1040, which means you benefit whether or not you itemize your deductions.
However, it is important to note that you cannot claim the health insurance premium write-off for months when you or your spouse were eligible to participate in an employer-subsidized health plan. Additionally, you cannot include in your medical expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, Wage, and Tax Statement.
If you did not include Medicare premiums or other insurance premiums on a prior year's return, you can file an amended return to claim or increase your deduction for self-employed health insurance for that year. You can claim this deduction regardless of whether you choose to claim the standard deduction or itemize your deductions.
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Medical expenses exceeding 7.5% of adjusted gross income
The IRS allows taxpayers to deduct their total qualified unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income (AGI). This applies to expenses not compensated by insurance or otherwise, regardless of whether you receive the reimbursement directly or payment is made on your behalf to the doctor, hospital, or other medical provider.
The deduction value for medical expenses varies because the amount changes based on your income. Your AGI is your total income subject to tax from your tax return minus any adjustments to income, such as contributions to a traditional IRA and deductible student loan interest. For example, if you have an AGI of $45,000 and $5,475 of medical expenses, you would multiply $45,000 by 0.075 (7.5%) to find that only expenses exceeding $3,375 can be included as an itemized deduction. This leaves you with a medical expense deduction of $2,100 ($5,475 minus $3,375). This amount can be included on your Schedule A, Itemized Deductions.
On Schedule A, report the total medical expenses you paid during the year on line 1 and your adjusted gross income (from your Form 1040) on line 2. Enter 7.5% of your adjusted gross income on line 3. Enter the difference between your expenses and 7.5% of your adjusted gross income on line 4. The resulting amount on line 4 will be added to any other itemized deductions and subtracted from your adjusted gross income to reduce your taxable income for the year. If this amount, plus any other itemized deductions you claim, is less than your Standard Deduction, you probably shouldn't itemize.
You can include in medical expenses insurance premiums you pay for policies that cover medical care. You can't include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction. Medical care policies can provide payment for treatment that includes long-term care (subject to additional limitations). If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement.
You can also deduct unreimbursed expenses for visits to psychologists and psychiatrists. Unreimbursed payments for prescription medications and appliances such as glasses, contacts, false teeth, and hearing aids are also deductible. The IRS also lets you deduct the expenses that you pay to travel for medical care, such as mileage on your car, bus fare, and parking fees. Amounts paid for transportation include your out-of-pocket expenses for your personal car, such as gas and oil, or the standard mileage rate for medical expenses, plus the cost of tolls and parking; taxi, bus, or train fare; and ambulance costs.
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Insurance premiums and tax deductions
The IRS allows you to deduct unreimbursed payments for preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care.
If you pay for health insurance coverage before taxes are taken out of your employer’s paycheck, you can’t deduct your health insurance premiums. However, if you pay for health insurance coverage after taxes are taken out of your paycheck, you might qualify for the medical expense deduction. If your insurance is through your employer, you can only deduct out-of-pocket premiums, provided you don’t use an HSA to cover those costs. This applies only if you itemize deductions and if your total medical expenses exceed 7.5% of your adjusted gross income for the year.
If you get insurance in the Health Insurance Marketplace, you can deduct the full cost of your health care premiums from your taxable income, even if you don’t itemize your taxes. If you’re self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income, rather than an itemized deduction, for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy for yourself, your spouse, and dependents.
If you don't claim 100% of your paid premiums, you can include the remainder with your other medical expenses as an itemized deduction on Schedule A (Form 1040). You can also include in medical expenses insurance premiums you pay for policies that cover medical care. You can't include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction.
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Deductibles and copayments
The IRS allows taxpayers to deduct qualified, unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income. This includes deductibles and copayments for treatments that insurance does not cover.
If you are self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income for premiums paid on a health insurance policy covering medical care for yourself, your spouse, and dependents. If you don't claim 100% of your paid premiums, you can include the remainder with your other medical expenses as an itemized deduction on Schedule A (Form 1040).
You can also deduct unreimbursed expenses for visits to psychologists and psychiatrists. Unreimbursed payments for prescription medications and appliances such as glasses, contacts, false teeth, and hearing aids are also deductible.
It is important to note that you cannot deduct medical expenses that were paid by insurance companies or other sources. This includes payments from Medicare. Even if a policy only reimburses specific medical expenses, you must use the amount received from that policy to reduce your total medical expenses, including those it does not reimburse.
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Medical expenses and standard deduction
The Internal Revenue Service (IRS) allows you to deduct unreimbursed payments for preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care.
You can also include in medical expenses insurance premiums you pay for policies that cover medical care. However, you cannot include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction. You can't deduct payments for health insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or an employer of your dependent, or your child under the age of 27.
If you're self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income, rather than an itemized deduction, for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy for yourself, your spouse, and dependents.
To receive a tax benefit, you have to itemize deductions on Schedule A, and your total itemized deductions — deductible medical expenses, state and local taxes, home mortgage interest, and charitable contributions — must be greater than your Standard Deduction. The IRS allows all taxpayers to deduct their total qualified unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income if the taxpayer uses IRS Schedule A to itemize their deductions.
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Frequently asked questions
Yes, but only if you itemize your deductions on your tax return and not if you take the standard deduction. You can deduct insurance premiums you pay for policies that cover medical care. However, you cannot include insurance premiums that were paid and for which you are claiming a credit or deduction.
Some examples of tax-deductible medical expenses include unreimbursed payments for preventive care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care.
Medical expenses that are generally not deductible include the cost of nonprescription drugs (except insulin), cosmetic procedures, and other purchases for general health, such as toothpaste, health club dues, vitamins, and diet food.
If you pay for health insurance coverage before taxes are taken out of your employer's paycheck, you cannot deduct your health insurance premiums. However, if you pay for health insurance coverage after taxes are taken out of your paycheck, you might qualify for the medical expense deduction.
To qualify for the medical deduction, your unreimbursed medical and/or dental expenses need to exceed 7.5% of your adjusted gross income (AGI) for the year.
