Paying for your own health insurance is generally tax deductible, but how much you actually save depends on how you’re paying. Self-employed people get the best treatment: an above-the-line deduction that reduces adjusted gross income directly, with no percentage floor. Everyone else has to itemize on Schedule A and can only count medical costs above 7.5% of AGI. And if premiums already come out of your paycheck pre-tax, you’ve received the benefit automatically and cannot deduct them again.
If Your Premiums Come Out of a Paycheck
Most employer-sponsored coverage runs through a Section 125 cafeteria plan, which pays premiums with pre-tax dollars. Those amounts never appear as taxable income on your W-2, so the tax break is already baked in. You cannot then claim the same premiums as a deduction. The IRS specifically bars deducting any premium your employer treated as paid through a cafeteria or premium conversion plan unless that amount is included in Box 1 of your W-2.1Internal Revenue Service. Topic No. 502 Medical and Dental Expenses
Check a pay stub if you’re not sure. Pre-tax deductions reduce your gross pay before federal income tax is calculated. If your employer doesn’t offer a cafeteria plan and you’re paying with after-tax dollars, or if you buy individual coverage on your own alongside a job, those premiums can go on Schedule A as medical expenses.
The Self-Employed Health Insurance Deduction
If you have self-employment income, the self-employed health insurance deduction is the most valuable way to write off premiums. It lowers your AGI directly, which also lowers the baseline for dozens of other tax calculations that phase in or out based on income. You compute it on Form 7206 and carry the result to Schedule 1 (Form 1040), line 17.2Internal Revenue Service. Instructions for Form 7206
Two rules control who qualifies.
First, the deduction cannot exceed your net self-employment profit. If your business earned $30,000 for the year and you paid $35,000 in premiums, your deduction stops at $30,000.3Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
Second, you’re disqualified for any month in which you or your spouse was eligible for subsidized health coverage through an employer. This is a month-by-month test, and eligibility alone kills it. If your spouse could have enrolled in an employer plan from January through June, even without signing up, you lose the deduction for those six months. Premiums paid in the remaining months still count.4Internal Revenue Service. Form 7206 – Self-Employed Health Insurance Deduction
Eligible premiums cover you, your spouse, your dependents, and any child under age 27 at year-end, even if you don’t claim that child as a dependent. Medical, dental, and qualified long-term care policies all qualify.4Internal Revenue Service. Form 7206 – Self-Employed Health Insurance Deduction
S Corporation Shareholders
Owning more than 2% of an S corporation puts you in the self-employed category for health insurance. The company has to pay or reimburse your premiums and report the amount as wages on your W-2. Those wages face income tax but not Social Security or Medicare tax. You then claim the self-employed deduction on your personal return to cancel out the added income. The plan has to be established under the business.
Deducting Premiums as a Medical Expense on Schedule A
If the self-employed deduction isn’t available, itemizing on Schedule A is the fallback. This is the route for retirees, people between jobs, employees paying after-tax premiums, and anyone buying individual coverage without any business connection.
Two hurdles cut into what you actually save.
Itemizing only pays off when your total itemized deductions exceed the standard deduction. For 2026 that’s $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for heads of household.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Fall short and listing medical expenses gets you nothing.
Even when you do itemize, only the portion of unreimbursed medical costs above 7.5% of AGI counts.1Internal Revenue Service. Topic No. 502 Medical and Dental Expenses At $80,000 of AGI, the floor is $6,000. If your combined premiums, copays, prescriptions, and other medical costs totaled $9,000, only $3,000 makes it onto Schedule A.
That math is why the self-employed deduction is worth so much more. Schedule A generally delivers meaningful savings only for people with unusually high medical costs relative to income, or those already itemizing because of mortgage interest, state and local taxes, or other large deductions.
Health, dental, and vision premiums qualify, along with Medicare premiums and qualified long-term care policies.6Internal Revenue Service. Publication 502 – Medical and Dental Expenses Only what you paid out of pocket counts. Anything covered by an employer, a tax credit, or another reimbursement has to be excluded.
Medicare and Long-Term Care Premiums
Medicare Part B, Part D, and Medigap supplemental premiums are all deductible medical expenses when you itemize. Part A premiums count too if you enrolled voluntarily because you weren’t automatically covered through Social Security or government employment.6Internal Revenue Service. Publication 502 – Medical and Dental Expenses The 7.5% floor still applies, though retirees with modest incomes and steady medical costs often clear it more easily than working-age taxpayers.
Qualified long-term care premiums are also deductible, but capped by age at year-end. For 2026:
- Age 40 or younger: $500
- Age 41 to 50: $930
- Age 51 to 60: $1,860
- Age 61 to 70: $4,960
- Age 71 or older: $6,200
The caps apply per person, so a couple ages 62 and 65 could include up to $9,920 combined. Self-employed taxpayers fold long-term care premiums (within those age limits) into the Form 7206 deduction.4Internal Revenue Service. Form 7206 – Self-Employed Health Insurance Deduction Everyone else puts them on Schedule A subject to the 7.5% AGI floor.6Internal Revenue Service. Publication 502 – Medical and Dental Expenses
When a Premium Tax Credit Covers Part of Your Premium
If you buy coverage through the Marketplace and receive the Premium Tax Credit, only the portion of the premium you paid yourself is deductible. The amount the credit covered cannot be claimed.1Internal Revenue Service. Topic No. 502 Medical and Dental Expenses
If your monthly premium was $500 and the advance credit paid $350, only the remaining $150 per month is deductible. That works out to $1,800 for the year, which flows into either the self-employed deduction or your Schedule A total depending on which path applies.
The Marketplace sends Form 1095-A showing your total premiums, the benchmark amount, and any advance credit payments. You reconcile those figures on Form 8962 based on your final income for the year.7Internal Revenue Service. Reconciling Your Advance Payments of the Premium Tax Credit The reconciliation is required whenever you received advance credit payments, so it isn’t optional even if you’re not itemizing.
A Note on HSAs
Health Savings Accounts generally cannot pay health insurance premiums tax-free. Using HSA funds for regular HDHP premiums triggers income tax on the withdrawal plus a 20% penalty if you’re under 65.8Office of the Law Revision Counsel. 26 US Code 223 – Health Savings Accounts
Four premium types are exempted:9Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
- COBRA continuation coverage
- Health coverage while you’re receiving unemployment compensation
- Qualified long-term care insurance, subject to the same age-based annual limits
- Medicare Part B, Part D, and Medicare Advantage premiums after the account holder turns 65 (Medigap is specifically excluded)
You can’t contribute to an HSA once you enroll in Medicare, but an existing balance can keep paying qualified expenses, including those Medicare premiums, for the rest of your life.