Health insurance premiums are tax deductible, but the path depends on how you earn your income. If you’re self-employed, you can subtract qualifying premiums directly from your gross income without itemizing. Everyone else has to itemize on Schedule A and can only deduct the portion of total medical expenses, premiums included, that exceeds 7.5% of adjusted gross income. Premiums already paid with pre-tax dollars, covered by a subsidy, or reimbursed from a tax-advantaged account don’t count either way.
If You’re Self-Employed
Self-employed filers get the better deal by a wide margin. Premiums for medical, dental, vision, and qualifying long-term care insurance covering you, your spouse, and your dependents come off your income as an above-the-line deduction, which lowers your AGI whether you itemize or take the standard deduction.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses – Section: Special Rules for Health Insurance Costs of Self-Employed Individuals Medicare Part B and Part D premiums qualify too if you’re self-employed.2Internal Revenue Service. Instructions for Form 7206
The deduction is open to sole proprietors, partners, and S corporation shareholders who own more than 2% of the company.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses – Section: Special Rules for Health Insurance Costs of Self-Employed Individuals Two limits catch people:
- Your deduction can’t exceed the earned income from the business that established the plan, and it can’t create or increase a business loss.
- For any month you were eligible to participate in a subsidized health plan through any employer, including your spouse’s, you can’t claim the deduction for that month, even if you never enrolled.2Internal Revenue Service. Instructions for Form 7206
One more thing worth knowing before you file: this deduction lowers your income tax only. It does not reduce your self-employment tax. The SE tax calculation uses your net earnings before the health insurance deduction gets applied.2Internal Revenue Service. Instructions for Form 7206
You calculate the deductible amount on Form 7206, and the result flows to Schedule 1, Line 17.2Internal Revenue Service. Instructions for Form 7206
If You’re Not Self-Employed
Everyone else claims premiums as part of the medical expense deduction on Schedule A. You can deduct unreimbursed medical and dental expenses paid for yourself, your spouse, or your dependents, but only the portion that exceeds 7.5% of your AGI.3Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses With an AGI of $60,000, the first $4,500 of medical costs, premiums included, produces no benefit. Only dollars above that threshold count.
Itemizing means giving up the standard deduction, so it only pays off when all your itemized deductions combined beat the standard amount. For the 2026 tax year, the standard deduction is $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 For most households, the medical deduction only produces a real benefit in a year of major surgery, expensive ongoing treatment, or unusually high premiums stacked on top of mortgage interest and state taxes.
Premiums That Don’t Count
Not every dollar you send to an insurance company is deductible. Watch for these:
- Pre-tax payroll premiums. If your employer withholds premiums before calculating your taxes, through a Section 125 cafeteria plan for example, those dollars are already tax-free. You can’t deduct them again. Your pay stub or W-2 will show whether premiums are pre-tax.
- The subsidized portion of Marketplace premiums. If advance premium tax credits lowered your monthly bill, only the amount you actually paid out of pocket is deductible.5Internal Revenue Service. Instructions for Form 8962
- Anything paid from an HSA, FSA, or HRA. Premiums or medical costs covered by these accounts can’t also be claimed as a medical deduction. That would be double-dipping.6Internal Revenue Service. Publication 502, Medical and Dental Expenses
Medicare Premiums
Premiums for Part B (outpatient) and Part D (prescription drug) coverage are deductible medical expenses whether you itemize on Schedule A or claim the self-employed deduction.6Internal Revenue Service. Publication 502, Medical and Dental Expenses Medicare Advantage (Part C) premiums generally qualify as well because Part C replaces Part B.
Part A is different. Most people don’t pay Part A premiums because they earned enough work credits through payroll taxes, and the payroll taxes that funded that eligibility are not a deductible medical expense. If you voluntarily enrolled in Part A because you weren’t covered through Social Security or government employment, the premiums you pay out of pocket do qualify.6Internal Revenue Service. Publication 502, Medical and Dental Expenses
Marketplace Coverage and the 2026 Repayment Rule
If you bought coverage through the Health Insurance Marketplace, complete Form 8962 first. It reconciles the advance premium tax credit you received during the year against the actual credit your final income entitles you to, and it tells you the out-of-pocket premium amount you can claim.5Internal Revenue Service. Instructions for Form 8962
One change worth flagging for 2026: there is no longer a cap on repayment of excess advance credits. If your income came in higher than estimated and you received more subsidy than you qualified for, you repay the full difference, added to your tax bill.7Internal Revenue Service. Updates to Questions and Answers About the Premium Tax Credit In prior years, repayment caps softened the blow for lower-income households. That safety net is gone for 2026. If your income shifts during the year, report the change to the Marketplace promptly.
What You’ll Need to File
If you enrolled through the Marketplace, you’ll receive Form 1095-A with your monthly premiums and any advance credits.8Internal Revenue Service. Questions and Answers About Health Care Information Forms for Individuals Insurers send Form 1095-B for coverage they provide directly, and large employers send Form 1095-C to full-time employees.9Internal Revenue Service. Health Insurance Marketplace Statements Hold on to these with your tax records.
For the itemized route, add every qualifying medical expense including premiums, copays, and prescriptions, enter the total on Schedule A, Line 1, and subtract 7.5% of your AGI. Only the excess transfers to Form 1040.3Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses For the self-employed route, use Form 7206 and carry the result to Schedule 1, Line 17.2Internal Revenue Service. Instructions for Form 7206
Keep receipts, Explanations of Benefits, and premium statements for at least three years. If the IRS asks about a medical deduction, you’ll need documentation showing who received the service, the provider’s name, the date, a description of the service, and the amount charged.6Internal Revenue Service. Publication 502, Medical and Dental Expenses Credit card statements alone won’t cut it.