How to Deduct Health Insurance Premiums on Taxes

If you want to know how to deduct health insurance premiums on taxes, the method depends almost entirely on whether you’re self-employed. Self-employed filers deduct premiums straight from gross income on Schedule 1 using Form 7206, no itemizing required. Everyone else has to itemize on Schedule A and can only deduct the share of unreimbursed medical costs that exceeds 7.5% of adjusted gross income.¹² The gap between those two paths can easily be worth thousands of dollars, so start by figuring out which one applies to you.

You can’t use both deductions for the same premiums. But if you’re self-employed and part of your premium exceeds your net business profit, that excess can still go on Schedule A if you itemize.

The Self-Employed Health Insurance Deduction

If you have net self-employment income, this is the better route in almost every case. You deduct the full cost of qualifying premiums directly from gross income on Schedule 1 of Form 1040 using Form 7206.² There’s no 7.5% floor and no need to itemize. The deduction reduces your AGI, which can lower other tax calculations further down the return.

The deduction is available to sole proprietors, partners with net earnings on Schedule K-1, and shareholders who own more than 2% of an S corporation. S corp shareholders have an extra step: the company must include the premiums as wages on the shareholder’s W-2 before the shareholder claims the deduction on the personal return.²

The Net Profit Cap

Your deduction can’t exceed the net profit from the specific business under which the insurance plan is established. If your business earned $12,000 and you paid $15,000 in premiums, you deduct $12,000 under the self-employed rules. The remaining $3,000 can still be included on Schedule A if you itemize.² A business with a net loss produces a zero deduction for that year.

Running multiple businesses doesn’t help you combine profits to raise the limit. Each plan is tied to the business that established it, and the deduction is capped at that business’s earnings.³ You can, however, set up separate health and dental plans under different businesses if each one has enough net income to cover its plan.

The Spouse’s Employer Plan Rule

This is the trap most self-employed filers miss. You can’t claim the self-employed health insurance deduction for any month during which you were eligible to participate in a subsidized health plan from any employer, including your spouse’s. Whether you actually enrolled is irrelevant.⁴ If your spouse’s job offered family coverage during open enrollment and you could have signed up, you lose the deduction for those months even if you bought your own policy instead.

The Itemized Medical Expense Deduction

If you’re not self-employed, Schedule A is your only path. You add up all qualifying unreimbursed medical costs for the year, including premiums, and deduct the amount that exceeds 7.5% of your AGI.¹ An AGI of $80,000 means more than $6,000 in medical costs before the first deductible dollar.

The bigger problem is the standard deduction. Itemizing only pays off when your total itemized deductions beat it. 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.⁵ Most people take the standard deduction, which effectively closes off the medical expense route. It tends to help in years with unusually high medical costs: major surgery, chronic treatment, or expensive premiums stacked with other large itemized deductions.

One rule denies the deduction to a lot of employees who don’t realize it: premiums paid with pre-tax dollars through a cafeteria plan (Section 125) have already been excluded from your taxable income on your paycheck.⁶ You can’t deduct them a second time. Only after-tax premium payments qualify.

Which Premiums Qualify

The IRS distinguishes between coverage that pays for medical care and coverage that pays you cash when something goes wrong. Only the first type counts.

Premiums that generally qualify under either method:

Individual health insurance, including Marketplace policies
COBRA continuation coverage paid with after-tax dollars
Medicare Part A, Part B, and Part D premiums, including amounts deducted from Social Security
Medigap (Medicare Supplement) policies
Dental and vision insurance, standalone or bundled
Long-term care insurance, subject to age-based caps

Premiums that don’t qualify:¹

Life insurance, even policies with health-linked benefits
Disability income insurance
Specific disease policies, such as cancer-only plans
Accidental death and dismemberment coverage

The test is whether the policy pays a medical provider or pays you. If it sends money to you, it usually isn’t deductible. Bundled policies that mix deductible and non-deductible coverage need to be split so you only claim the qualifying portion.

Marketplace Premiums and the Premium Tax Credit

Marketplace enrollees who received advance payments of the Premium Tax Credit (APTC) have to reconcile those payments on Form 8962 at tax time.⁷ The reconciliation affects how much you can deduct, because you only get to deduct the share of premiums you actually paid out of pocket after subtracting the credit you were finally allowed.

If your total annual premium was $8,700 and your final PTC was $3,600, you include $5,100 as a medical expense.¹ One wrinkle works in your favor: if you received too much APTC and have to pay the excess back, that repayment gets added to your deductible premiums. Skipping Form 8962 isn’t an option, because the IRS matches your return against the Form 1095-A the Marketplace sent.⁸

Medicare Premiums

Medicare premiums are often overlooked. Part B premiums qualify even when automatically deducted from your Social Security check. Part D prescription drug premiums and Medigap supplements are also deductible.¹ Most people don’t pay a Part A premium because they earned enough work credits, but any Part A premium you do pay counts.

Retirees with self-employment income (consulting, freelancing, a small business) can deduct Medicare premiums through the self-employed deduction instead of Schedule A, which eliminates the 7.5% floor. That’s a meaningful advantage for anyone whose medical costs beyond premiums are modest. Late-enrollment penalties on Part B or Part D premiums are generally not deductible.

Long-Term Care Insurance Caps

Long-term care premiums are deductible up to an annual limit based on your age at the end of the tax year. For 2026:

Age 40 or younger: $500
Age 41 to 50: $930
Age 51 to 60: $1,860
Age 61 to 70: $4,960
Over age 70: $6,200

The caps apply whether you itemize or use the self-employed deduction. Any premium amount above your age-based limit isn’t deductible. The limits adjust for inflation, so check the current year’s figures when you file.

Premiums for Family and Dependents

You can deduct premiums you pay for your spouse, your children under age 27, and other qualifying dependents.¹ The under-27 rule is useful because it applies whether or not the child is your dependent for other tax purposes. A 25-year-old with a full-time job who files independently can still be on your plan, and you can still deduct the premiums.

For other relatives, the rules tighten. The person generally must qualify as your dependent, meaning you provide more than half of their support and they earn less than $5,300 in gross income for 2026.⁹ A limited exception: someone who meets every qualifying relative test except the income threshold can still have their medical expenses deducted by the taxpayer who supports them.¹

Buying a separate policy for someone who already has employer coverage is harder to defend as a deduction. The IRS looks at whether the cost was medically necessary, and duplicative coverage raises that question. Keep documentation explaining why the additional policy was needed.

Paying Premiums From an HSA

Health Savings Accounts don’t generally pay premiums tax-free. Using HSA money for premiums outside the permitted categories makes the withdrawal taxable, plus a 20% penalty if you’re under 65. The IRS allows tax-free HSA distributions for premiums in only four situations:¹⁰

COBRA continuation coverage
Health coverage while receiving unemployment compensation
Medicare premiums (Parts A, B, D, and Medicare Advantage) if the account holder is 65 or older
Long-term care premiums, up to the age-based limits

Marketplace premiums, individual policies bought outside of unemployment, and Medigap supplements are not on that list. If you pay premiums tax-free from an HSA, you can’t also deduct them. The tax benefit has already been taken.

Documentation and Common Mistakes

The IRS can ask for proof of every dollar. Keep bank statements, credit card records, and annual premium summaries from your insurer. If a policy bundles deductible and non-deductible coverage, keep documentation that breaks out the qualifying portion.

Three forms you may receive during the year help with your return: Form 1095-A from the Marketplace, Form 1095-B from your insurance company, and Form 1095-C from a large employer.⁸ The 1095-A is essential if you received advance PTC payments.

Mistakes that regularly produce denied deductions or IRS notices:

Deducting pre-tax premiums already excluded from taxable wages on your paycheck. This is the single most common error.
Claiming non-qualifying policies like disability, critical illness, or AD&D as medical insurance.
Double-dipping with an HSA, HRA, or employer reimbursement arrangement that already paid the premium tax-free.
Missing the spouse’s-employer-plan rule when claiming the self-employed deduction.
Deducting the full Marketplace premium without subtracting the Premium Tax Credit, or skipping Form 8962 entirely.

1
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
2
Internal Revenue Service. 2025 Instructions for Form 7206 Self-Employed Health Insurance Deduction
3
Internal Revenue Service. Health Insurance Deduction for Self-Employed Individuals Under IRC 162(l)
4
Internal Revenue Service. Instructions for Form 7206 (2025)
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
7
Internal Revenue Service. Instructions for Form 8962
8
Internal Revenue Service. Questions and Answers About Health Care Information Forms for Individuals
9
Internal Revenue Service. Rev. Proc. 2025-32
10
Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans