Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider. Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.


Insurance Q&A: “Is health insurance tax deductible?”

In some instances, yes, health insurance premiums and additional costs can be deducted from your overall tax bill. There are a few different situations where this can happen.

Unfortunately, most of us who are enrolled in an employer sponsored program are largely out luck.

However, some employees may be able to catch some tax breaks depending how they pay for their health insurance, as you will see below.

Keep in mind we’re talking about federal tax returns.

Here is a basic breakdown and description of the benefits you can expect to write-off (including premiums, deductibles and other out-of-pocket expenses):

Self Employed Individuals: This one is a biggie. You may be able to expense every dime of your health insurance premiums if you are self-employed. Additionally, you might even get to deduct additional expenses above regular monthly premiums.

The catch here is that you have to show a positive income for the year. Why, you ask? In order to keep everyone in the U.S. from starting a fake business to get the deduction. Everyone would have their own “business” of doing “whatever they could think of” to take advantage of the credit.

Additionally, you cannot take a deduction for any month of the year in which you were eligible for a subsidized health insurance plan via an employer. So if you worked for a company, and then quit and started your own business, only those latter months where you were self-employed would be eligible for a tax deduction.

Health Savings Accounts (HSA’s): This is where W-2 employees can score some tax breaks. Money paid into HSA’s is pre-tax. Also, the money your employer (may) contribute is not counted as “income” for tax purposes. This doesn’t mean you deduct the money your employer pitches in…it just isn’t counted as income (meaning you score without having to do anything “tax wise”).

Private Health Insurance: This is for individuals who have the opportunity to opt into an employer sponsored program, but don’t. Likely you are in this category because your company plan doesn’t offer good enough coverage or makes you pay too much for what they offer. Many small companies run into this situation.

In short, if your private health insurance costs exceed 7.5% of your adjusted gross income, you can get the tax break…it’s not automatic.

Relatives: Health insurance tax deductions are also available for individuals who pay premiums and other expenses for family members. Not your 5th cousin removed…but legitimate, immediate family members, such as children, grandchildren, in-laws’ nieces and nephews, and even foster and adopted children.

You won’t be able to deduct a single prescription you paid for last year though. You will have to prove you paid at least half of the family member’s healthcare costs for the year in question.

Consult the IRS website for more information and always be sure to consult with your tax preparer to ensure you make the proper deductions.

Tip: You should contact a local independent insurance agent to obtain private health insurance quotes even if you have the option through an employer sponsored program.

Taking the easy way out often leads to overpaying for what could be affordable health insurance coverage. And not having health insurance isn’t recommended (why do I need health insurance?).