Tax Deductions for Insurance Premiums: Health, LTC, and Business

Tax deductions for insurance premiums are narrow by design: personal insurance is generally not deductible, but health coverage, qualified long-term care policies, and insurance tied to a trade or business are the main exceptions written into the tax code. Whether a deduction actually saves you money depends on how you paid the premiums, whether you are self-employed, and whether your itemized expenses clear the standard deduction. For 2026, that threshold is $16,100 for single filers and $32,200 for married couples filing jointly.¹

Health Insurance Premiums You Itemize

Premiums you pay for health, dental, or vision coverage with after-tax dollars count as medical expenses on Schedule A. There’s a floor, though. Only the portion of your total medical expenses that exceeds 7.5% of your adjusted gross income produces any tax benefit.² If your AGI is $80,000, the first $6,000 of medical costs generates nothing. Dollars above that line are what matter.

The deduction covers premiums for you, your spouse, and your dependents. Medicare Part B, Part D, and Medigap premiums qualify, and so does Part A if you enrolled voluntarily because you weren’t covered through Social Security or government employment.³

Premiums pulled from your paycheck pre-tax through an employer cafeteria plan do not qualify. Those dollars never showed up in your taxable income in the first place, so deducting them would be a second bite at the same apple.⁴

The Self-Employed Health Insurance Deduction

Self-employed taxpayers get a much better deal. You subtract health insurance premiums directly from gross income on Schedule 1, above the line, so the benefit lands even if you take the standard deduction.⁵ The deduction covers health, dental, vision, and qualified long-term care premiums for you, your spouse, dependents, and children under 27.

Two hard limits apply. Your deduction can’t exceed the earned income from the business that established the plan; a Schedule C profit of $10,000 caps the deduction at $10,000 even if you paid $12,000 in premiums. And you can’t claim it for any month you were eligible to participate in a subsidized health plan through your spouse’s employer or another employer. Eligibility is measured month by month, so partial-year eligibility doesn’t wipe out the whole year.

You calculate the deduction on Form 7206 and report it on Schedule 1, line 17. Any premium amount that exceeds the above-the-line limit can still be claimed as an itemized medical expense on Schedule A, subject to the 7.5% floor.⁶

If You Own More Than 2% of an S Corporation

The deduction is available, but the mechanics are specific. The S corporation must either pay the premiums directly or reimburse you, and the premium amount must be included as wages in Box 1 of your W-2. Those wages are subject to income tax withholding but not to Social Security or Medicare tax.⁷ If you pay premiums personally without any reimbursement from the corporation, the above-the-line deduction is off the table.

Marketplace Coverage and the Premium Tax Credit

If you bought coverage through the Health Insurance Marketplace and receive a Premium Tax Credit, the math gets circular: the deduction lowers your AGI, which raises your credit, which lowers the premium cost you actually bore, which shrinks the deduction. Publication 974 gives you two ways out, a Simplified Calculation Method and an Iterative Calculation Method.⁸ The rule underneath the arithmetic is simpler than the arithmetic: the deduction you claim plus the credit you receive can’t exceed your total enrollment premiums.⁹

Long-Term Care Insurance Premiums

Premiums for qualified long-term care insurance are treated as medical expenses, deductible either on Schedule A or through the self-employed health insurance deduction.¹⁰ The deductible amount is capped by your age at year-end. For 2026:

Age 40 or under: $500
Age 41 to 50: $930
Age 51 to 60: $1,860
Age 61 to 70: $4,960
Age 71 and older: $6,200

The caps apply per person, so spouses can each claim up to their own age-based limit. If you’re itemizing, the deductible portion still has to clear the 7.5% AGI floor along with your other medical expenses.³ Self-employed filers using the above-the-line route skip that floor.

Business Insurance Premiums

Insurance premiums that are ordinary and necessary for your trade or business are deductible as business expenses.¹¹ The category is broad and includes:

Fire, storm, theft, and similar property coverage on business property
General liability and professional malpractice coverage
Workers’ compensation premiums required by state law
The business-use portion of auto insurance, unless you use the standard mileage rate, which already factors insurance in
Business interruption policies covering lost profits
Group health and long-term care premiums paid for employees
Credit insurance covering losses from business bad debts
Life insurance on employees, but only if the business is not the beneficiary

Sole proprietors deduct these on Schedule C. Partnerships and S corporations take them on the business return. For anything used partly for personal purposes, split the expense by the business-use percentage; a vehicle used 60% for business supports a 60% deduction of its premium.

Home Office Insurance

If you run a business from a dedicated space in your home, a portion of your homeowners or renters insurance may be deductible. You choose between two methods each year. The simplified method pays $5 per square foot of business space, up to 300 square feet, capped at $1,500, with no separate insurance calculation. The regular method applies the business-use percentage of your home to your actual insurance premium along with other home expenses.¹² The space has to be used regularly and exclusively for business. That’s the requirement most claims fail on in an audit.

Premiums You Cannot Deduct

The tax code starts from a simple default: personal expenses are not deductible.¹³ Everything above is a statutory exception. Common premiums that stay outside those exceptions:

Life insurance premiums where you or a related party is the beneficiary, whether the policy is term, whole, or universal.¹⁴
Personal disability income insurance. The tradeoff is that benefits you later receive from a policy you paid for with after-tax dollars are generally tax-free.
Personal auto and homeowners insurance, unless tied to business use.
Mortgage insurance premiums. The deduction was allowed for premiums paid between 2007 and 2021, but it has expired and is not available for current tax years. Bills to reinstate it have been introduced; none had passed as of early 2026.¹⁵

Avoiding Double Benefits

If you pay medical expenses using tax-free distributions from a Health Savings Account, you can’t also deduct those same expenses on Schedule A. The IRS treats it as a double benefit. Keep records showing which expenses were paid from the HSA and which came from other funds.¹⁶

The same principle governs the self-employed health insurance deduction: any premium amount you claim above the line on Schedule 1 can’t also appear in your Schedule A medical expenses.¹⁷ And any portion of premiums covered by the Premium Tax Credit isn’t deductible at all, since you didn’t actually pay that portion.⁹

Forms and Records to Keep

Which forms you use depends on which deduction you’re claiming:

Itemized medical expenses, including qualifying insurance premiums, go on Schedule A, which builds in the 7.5% AGI calculation.
Self-employed health insurance runs through Form 7206, with the result flowing to Schedule 1, line 17.⁶
Business insurance is deducted on Schedule C for sole proprietors or on the applicable business return.
Premium Tax Credit reconciliation happens on Form 8962, with Publication 974 worksheets if you’re also claiming the self-employed deduction.

If anyone in your household had Marketplace coverage, expect Form 1095-A by mid-February. You need it to reconcile any advance credit payments.¹⁸

The accuracy-related penalty for an underpayment caused by negligence or disregard of the rules is 20% of the underpaid amount.¹⁹ Insurance premium deductions aren’t especially audit-prone by themselves, but they draw scrutiny when the personal-versus-business line gets blurry or when a taxpayer claims a deduction they weren’t eligible for. Hold on to premium receipts, Form 1095s, and any documentation supporting a business-use split for at least four years after filing. Self-employed filers should also keep monthly records showing whether an employer-subsidized plan was available, because that eligibility test is applied month by month.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses
3
Internal Revenue Service. Publication 502 – Medical and Dental Expenses
4
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
5
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses – Section: (l)
6
Internal Revenue Service. Instructions for Form 7206 – Self-Employed Health Insurance Deduction
7
Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues
8
Internal Revenue Service. Publication 974 – Premium Tax Credit (PTC)
9
Internal Revenue Service. Instructions for Form 8962
10
Office of the Law Revision Counsel. 26 USC 7702B – Treatment of Qualified Long-Term Care Insurance
11
eCFR. 26 CFR 1.162-1 – Business Expenses
12
Internal Revenue Service. Simplified Option for Home Office Deduction
13
Office of the Law Revision Counsel. 26 USC 262 – Personal, Living, and Family Expenses
14
Office of the Law Revision Counsel. 26 USC 264 – Certain Amounts Paid in Connection With Insurance Contracts
15
Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction
16
Internal Revenue Service. Health Savings Accounts and Other Tax-Favored Health Plans (Publication 969)
17
Internal Revenue Service. Form 7206 – Self-Employed Health Insurance Deduction
18
Internal Revenue Service. Health Insurance Marketplace Statements
19
Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments