How to Deduct Health Insurance Premiums on Taxes

To deduct health insurance premiums on your taxes, the method depends on how you earn your income. If you have self-employment income, you deduct premiums directly from gross income on Schedule 1 using Form 7206, with no itemizing required. If you don’t, you itemize on Schedule A and can only deduct the portion of your total unreimbursed medical costs, premiums included, that exceeds 7.5% of your adjusted gross income.¹² The self-employed path is dramatically better, and the difference between the two can run into thousands of dollars.

The Two Paths, and Which One You’re On

The IRS gives you two separate ways to deduct premiums, and you don’t get to pick. Your work situation decides.

The self-employed health insurance deduction sits on Schedule 1 of Form 1040. You subtract premiums from gross income dollar for dollar, which lowers your AGI and can improve other tax calculations that key off it. You don’t need to itemize. You do need net self-employment income, and the deduction is available to sole proprietors, partners with net earnings on a Schedule K-1, and shareholders who own more than 2% of an S corporation.²

The itemized medical expense deduction sits on Schedule A. You add up all unreimbursed medical costs for the year, premiums plus everything else, and deduct only the amount above 7.5% of AGI.¹ Someone with an AGI of $80,000 needs more than $6,000 in medical costs before a single dollar becomes deductible. And itemizing only makes sense if your total itemized deductions beat the standard deduction, which is $16,100 for single filers, $32,200 for joint filers, and $24,150 for heads of household in 2026.³ For most taxpayers, that means the medical deduction never gets used.

You can’t claim the same premium under both. But if the self-employed deduction is limited (say, by your net profit cap) and you itemize anyway, the leftover premium can go on Schedule A with your other medical costs.

How the Self-Employed Deduction Works

Report premiums on Form 7206 and carry the result to Schedule 1. The deduction covers health, dental, vision, and long-term care premiums for you, your spouse, your dependents, and your children under age 27.²

S corporation shareholders have one extra step. The company must include the premium amounts as wages on the shareholder’s W-2 before the shareholder deducts them on the personal return.² Miss that and the deduction doesn’t hold up.

The Net Profit Cap

Your deduction can’t exceed the net profit of the specific business under which the plan was established. If the business cleared $12,000 and you paid $15,000 in premiums, you can deduct $12,000. The remaining $3,000 goes to Schedule A if you itemize.² A loss year means no deduction. And if you run more than one business, you can’t pool their profits to lift the cap; each plan is tied to the business that established it.⁴

The Spouse’s Employer Plan Trap

This one catches people. You lose the self-employed deduction for any month you were eligible to participate in a subsidized health plan through any employer, including your spouse’s. Eligibility alone kills it. It doesn’t matter if you actually enrolled or bought your own policy instead.⁵ Check open-enrollment eligibility month by month before claiming.

How the Itemized Route Works

Total up qualifying unreimbursed medical costs, including premiums. Subtract 7.5% of AGI. Whatever remains goes on Schedule A.¹ The deduction tends to help people with a big medical year: major surgery, a chronic condition, or high premiums stacked with other large itemized deductions like mortgage interest and state taxes.

One rule catches almost everyone with employer coverage: premiums paid with pre-tax dollars through payroll don’t count. If your employer runs a Section 125 cafeteria plan and premiums come out of your check before taxes are calculated, that money was already excluded from your taxable income.⁶ Deducting them again is double-dipping, and it’s the most common error the IRS sees on Schedule A. Only after-tax premiums qualify.

Which Premiums Qualify

The test is whether the policy pays for medical care. Coverage that sends money to you rather than to a provider usually doesn’t qualify.

Deductible premiums, under either method:

Individual health insurance, including Marketplace policies
COBRA continuation coverage paid after-tax
Medicare Parts A, B, and D, including amounts pulled from Social Security
Medigap (Medicare Supplement) policies
Dental and vision insurance
Long-term care insurance, subject to age-based annual limits

Not deductible:¹

Life insurance, even policies bundled with health benefits
Disability income insurance that replaces lost wages
Specific-disease policies, like cancer-only coverage
Accidental death and dismemberment

Bundled policies that combine deductible and non-deductible coverage need to be split, and you can only claim the qualifying portion.

Long-term care premiums are capped by age at the end of the tax year. The 2026 limits run from $500 for age 40 or younger up to $6,200 for those over 70. Anything above your age-based cap simply isn’t deductible, under either method.

Marketplace Premiums and the Premium Tax Credit

If you buy through HealthCare.gov or a state exchange and get advance payments of the Premium Tax Credit, you reconcile them at tax time on Form 8962.⁷ The deductible amount is only what you actually paid out of pocket after subtracting your final allowed credit. Annual premium of $8,700 minus a final PTC of $3,600 leaves $5,100 deductible.¹

One detail works in your favor. If you received too much in advance and have to repay excess PTC, that repayment gets added to your deductible premium amount.

Don’t skip the 8962. The IRS matches your return against the Form 1095-A the Marketplace sent, and a missing reconciliation delays refunds or triggers a notice.⁸

Medicare Premiums

Retirees often miss that Medicare premiums are deductible. Part B counts even when it’s pulled automatically from a Social Security check. Part D drug plan premiums and Medigap premiums are deductible too.¹ Most people don’t pay a Part A premium, but if you do, it qualifies.

Retirees with any self-employment income, including consulting or freelance work, can run Medicare premiums through the self-employed deduction instead of Schedule A. That skips the 7.5% floor and is a much better outcome for someone whose only significant medical cost is premiums. Late-enrollment penalties added to Part B or Part D premiums are generally not deductible.

Deducting Premiums for Family

You can deduct premiums for your spouse, your children under age 27, and your qualifying dependents.¹ The under-27 rule is useful: it applies whether or not the child is actually your dependent for other tax purposes. A 25-year-old working full-time and filing independently can still be on your policy, and you can still deduct what you paid.

For other relatives, the rules are tighter. The person generally must be your dependent, which requires providing more than half of their support and gross income under $5,300 for 2026.⁹ There’s a narrow exception: someone who meets every qualifying relative test except the income threshold can still have medical expenses, premiums included, deducted by the taxpayer supporting them.¹

Common Mistakes That Get Deductions Denied

Keep records that show who paid, how much, when, and what was covered. Bank statements, credit card records, and annual insurer summaries all work. If a policy bundles deductible and non-deductible coverage, keep the breakdown. Watch for Form 1095-A (Marketplace), 1095-B (insurer), and 1095-C (large employer) in the mail; 1095-A is the one you need to complete Form 8962.⁸

The errors that most often trigger denied deductions or IRS notices:

Deducting pre-tax employer premiums that were already excluded from taxable income.
Claiming disability, critical illness, or AD&D premiums as medical expenses.
Double-dipping premiums already paid or reimbursed tax-free from an HSA, HRA, or employer plan.
Missing the spouse’s-employer-plan disqualifier on the self-employed deduction.
Skipping Form 8962 or deducting the full Marketplace premium without subtracting the PTC.

When it’s close, run both scenarios. Itemizing means giving up the standard deduction, so the medical deduction only helps if the total of everything on Schedule A beats it. The self-employed deduction almost always wins when it’s available, because it doesn’t require itemizing and it lowers AGI directly.

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. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. Health Insurance Deduction for Self-Employed Individuals Under IRC 162(l)
5
Internal Revenue Service. Instructions for Form 7206 (2025)
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