How to Deduct Health Care Premiums

Determining eligibility for health insurance premium tax deductions is somewhat complicated. It depends on your age, eligibility for Social Security, employer method of reimbursement and restrictions on self-employed persons. If the premiums are considered to be qualified IRS medical expenses, they are generally eligible for deduction.

Instructions

• 1

  Take insurance premiums off of your taxes if they cover only medical care services. These services include dental care, physician care, hospitalization, medicine and some long term care. For more information, see References below, second item.

• 2

  Deduct the medical insurance premiums from employer-sponsored plans only if the amount of premiums you have paid is noted in box one of your year-end W-2 form. If the amount in box one is zero, you cannot deduct these health insurance premiums.

• 3

  Learn which health insurance premiums are allowed to be deducted. Plans that cover living costs, long term care, loss of wages, disability or life insurance may not be deductible. For more information on the eligibility of health care plans, see References below, second item.

• 4

  Review the limitations in deducting the premiums for long term care policies. These policies must be considered as qualified plans under current IRS guidelines. For more information, see References below, third item. Allowable deductible insurance premiums will vary based on IRS-determined age ranges. The older the person in long term care, the higher the allowable amount of premium allowable for deduction.

• 5

  Do not deduct long term care premiums if these premiums were paid using tax free distributions from an IRS-qualified retirement plan that would have been otherwise considered as income.

• 6

  Do not take tax deductions for Health Reimbursement Arrangements (HRA). These reimbursements are made by your employer. You cannot deduct funds that were provided by your employer.

• 7

  Deduct premiums for Medicare A only if you are not covered by Social Security. These premiums are not deductible for individuals receiving Social Security as they are not considered to be a qualified medical expense.

• 8

  Take a tax deduction for premiums paid for Medicare B. If the premium information is not readily available, check with the Social Security Administration for additional premium information.

• 9

  Deduct all premiums paid for Medicare D, which is a voluntary drug reimbursement program and is considered to be a qualified medical expense.

• 10

  Work in a self-employed environment? You are likely eligible to deduct health insurance premiums. There are certain limitations based on the profitability and structure of your business operations. For more information, see Resources below.