Marketplace health insurance premiums are tax deductible, but with two significant limits for most filers. You can only deduct the share you actually pay after subtracting any Premium Tax Credit you qualify for, and that amount is deductible only as part of itemized medical expenses that exceed 7.5% of your adjusted gross income. Self-employed people have a separate, more generous path that avoids both limits.
Only Your Share After the Premium Tax Credit Counts
The Premium Tax Credit (PTC) helps eligible Marketplace enrollees pay for coverage, and many people take it in advance as monthly payments sent straight to their insurer. The portion of your premium covered by that credit is not your expense, so it cannot go into any medical deduction.1Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses – Section: Insurance Premiums
The number you subtract is not what the Marketplace advanced during the year. It’s the final PTC you were actually entitled to, calculated on Form 8962 when you file. The two figures usually differ because your actual annual income rarely matches the estimate on your Marketplace application.
The IRS gives a clear illustration. Say your annual premiums total $8,700 and the Marketplace paid $4,200 in advance credits, so you paid $4,500 out of pocket during the year. When you file, Form 8962 shows you were only entitled to $3,600 in credit, and you owe $600 back. Your deductible premium is $8,700 minus the $3,600 allowed credit, or $5,100, not the $4,500 you wrote checks for.2Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses – Section: Premium Tax Credit The repayment effectively becomes part of your deductible cost.
It works in reverse too. If your final allowed PTC turns out larger than what was advanced, your deductible premium shrinks by the same amount. You’d get the difference back as a refundable credit, but it comes off what you can claim as a medical expense.
The 7.5% AGI Floor and the Itemizing Hurdle
Health insurance premiums qualify as medical expenses under Internal Revenue Code Section 213, which covers medical, dental, vision, and qualified long-term care coverage.3Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses Claiming the deduction, though, requires itemizing on Schedule A instead of taking the standard deduction.
For 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Itemizing only pays off when your total itemized deductions clear those thresholds. Premiums alone often won’t get you there.
Even if you do itemize, only the portion of your total medical expenses that exceeds 7.5% of your adjusted gross income is deductible.5Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses If your AGI is $80,000, the floor is $6,000. Total medical expenses of $7,500 would produce a $1,500 deduction. Total medical expenses report on Line 1 of Schedule A, and the deductible amount after the floor appears on Line 4.6Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025)
Premiums aren’t the only thing that counts toward the total. Unreimbursed copayments, prescription drugs, dental work, and vision care all pool together before the 7.5% floor applies.
Self-Employed? Use the Above-the-Line Deduction Instead
Self-employed people can deduct up to 100% of their health insurance premiums as an adjustment to income on Schedule 1 of Form 1040. This above-the-line deduction skips the itemizing requirement and the 7.5% floor entirely, and it reduces your AGI directly, which helps every other calculation on your return.7Internal Revenue Service. Instructions for Form 7206 (2025) – Section: Self-Employed Health Insurance Deduction
You qualify if you had a net profit on Schedule C or Schedule F, net self-employment earnings as a partner, or wages from an S corporation where you were a more-than-2% shareholder. The deduction can’t exceed your net self-employment income from the business under which the plan is established.
One rule trips people up: you cannot claim this deduction for any month you were eligible to join a subsidized employer plan, including one through your spouse, even if you declined and bought a Marketplace plan instead.8Internal Revenue Service. Instructions for Form 7206 (2025) – Section: Other Coverage
If you took advance PTC payments, the math between the self-employed deduction and the credit is circular, because the deduction lowers AGI, which changes the allowed PTC, which changes the deductible premium. The IRS directs you to Publication 974 for the special calculation. Any premium amount you can’t deduct through the self-employed route can still be included with your other itemized medical expenses on Schedule A.9Internal Revenue Service. Topic No. 502, Medical and Dental Expenses
What Changed for 2026
The enhanced Premium Tax Credit rules that ran from 2021 through 2025 expired on January 1, 2026. People with household income above 400% of the federal poverty level no longer qualify for any credit, and the required contribution percentages at every income tier went up.10Office of the Law Revision Counsel. 26 USC 36B – Refundable Credit for Coverage Under a Qualified Health Plan11Congress.gov. Enhanced Premium Tax Credit and 2026 Exchange Premiums For 2026, household income must fall between 100% and 400% of the federal poverty level to qualify for any credit. For a single person in the contiguous 48 states, 400% of the 2026 poverty guideline is roughly $63,840.12U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. 2026 Poverty Guidelines
The repayment cap for excess advance credits is also gone. In prior years, if your income rose and you had to pay back advance payments, the amount owed was capped by income level — someone under 200% of the poverty level, for instance, owed back no more than $375 (single) or $750 (other filing statuses). For tax years beginning after December 31, 2025, you must repay the full excess regardless of income.13Internal Revenue Service. Updates to Questions and Answers About the Premium Tax Credit14Internal Revenue Service. One, Big, Beautiful Bill Provisions
Both changes matter for the deduction. Higher out-of-pocket premium shares and unlimited excess APTC repayments both raise the amount that qualifies as your medical expense, which is a thin consolation if you can’t clear the 7.5% floor anyway. Accurate income estimates on your Marketplace application matter more than ever, and if you expect income swings, taking less of the credit in advance avoids a large repayment at filing.
How to Calculate Your Deductible Premium
Start with Form 1095-A, which the Marketplace sends by January 31. Part III shows three monthly columns: Column A is your total enrollment premium, Column B is the premium for the second-lowest-cost silver plan (the IRS benchmark), and Column C is the advance credit paid to your insurer.15Internal Revenue Service. 2025 Instructions for Form 1095-A
Next, complete Form 8962 using the 1095-A data and your actual household income. Form 8962 compares the advance payments against the credit you actually qualified for and produces either excess credit to repay or additional credit to claim.16Internal Revenue Service. Instructions for Form 8962 (2025)
Your deductible premium is the Column A annual total minus the final allowed Premium Tax Credit from Form 8962. Add that to all other unreimbursed medical costs for the year, enter the combined total on Schedule A Line 1, then subtract 7.5% of your AGI from Form 1040 Line 11b. Whatever remains on Line 4 is your medical expense deduction.6Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025)
Any late shift in AGI changes both calculations. A year-end bonus or capital gain raises your AGI, which raises the 7.5% floor and may reduce your allowed PTC. Both effects shrink the deduction.
If you received advance PTC payments, you must file Form 8962 with your return even if you otherwise wouldn’t be required to file. Skipping it blocks you from receiving advance credit payments or cost-sharing reductions the following year.17Internal Revenue Service. Reconciling Your Advance Payments of the Premium Tax Credit
HSA Funds Generally Can’t Pay Marketplace Premiums
If you have a Health Savings Account, you can’t use it to cover routine Marketplace premiums. The IRS limits HSA distributions for insurance premiums to four specific situations:18Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans – Section: Insurance Premiums
- COBRA continuation coverage.
- Health coverage while receiving unemployment compensation.
- Medicare premiums if you’re 65 or older, excluding Medigap supplemental policies.
- Long-term care insurance, subject to age-based annual limits.
Standard Marketplace premiums don’t fit any of those categories. Using HSA funds to pay them creates a non-qualified distribution, which is subject to income tax and a 20% penalty if you’re under 65.