When Can I Deduct Health Insurance Premiums on My Taxes?

Based on your financial status and how you receive health insurance, you may be able to deduct health insurance premiums paid on your federal taxes. You cannot claim what you pay toward premiums if you have health insurance via your job because that amount is withheld from your paycheck before taxes.

In general, you can deduct health insurance premiums from your taxes if you meet the following criteria:

  • Instead of taking the standard deduction, you itemize your deductions.
  • Your health insurance premiums are paid directly to you, not via your employer.
  • Medical costs accounted for more than 7.5 percent of your annual income.

The IRS allows you to select a standard deduction or itemize expenses when filing for tax deductions. Your filing option depends on the amount you paid in expenses during the past year, including medical costs.

Is health insurance tax-deductible?

Health insurance premiums are deductible on federal taxes, in some cases, as these monthly payments are classified as medical expenses. Generally, if you pay for medical insurance on your own, you can deduct the amount from your taxes. Your income and how you get your insurance help determine whether the costs are eligible for tax deductions.

  • Is health insurance tax-deductible?
  • What’s the difference between standard and itemized deductions?
  • Other medical expenses that are tax-deductible
  • What medical expenses are not tax-deductible?

Is health insurance tax-deductible?

Health insurance premiums are deductible on federal taxes, in some cases, as these monthly payments are classified as medical expenses. Generally, if you pay for medical insurance on your own, you can deduct the amount from your taxes. Your income and how you get your insurance help determine whether the costs are eligible for tax deductions.

Below are some typical sources for health insurance and tax guidance for each item.

Health insurance source
Would health insurance be deductible?
Employer-sponsored plans Premiums for company health insurance are not tax-deductible. Employers deduct premium payments from your paycheck on a pretax basis. Since your employee contributions are already taking advantage of tax savings, you can’t deduct them again on your return. Health savings account (HSA) and flexible spending account (FSA) contributions also are paid on a pretax basis and are not tax-deductible.
COBRA insurance COBRA insurance is a health plan that allows you to temporarily continue employer-sponsored insurance coverage after you’ve left the company. Premiums for COBRA insurance are tax-deductible, as you pay them yourself on an after-tax basis.
Marketplace insurance If you buy medical coverage through an insurance marketplace, your premiums are deductible as a medical expense. But if you are eligible for a spouse’s employer-based health insurance and decline that coverage, you cannot deduct your personal insurance premiums on your return.
Medicare Premiums for Medicare Part B, C or D along with Medigap coverage are tax-deductible. Medicare Part A is not tax-deductible if premiums are paid through Social Security, which is usually the case. If you pay for Part A separately, you can deduct that cost.

Standard vs. itemized deductions

When you’re filing your taxes, you have the option to either itemize your deductions, where you catalog every deduction you qualify for (including homeownership and student loan interest, in addition to medical expenses), or take the “standard deduction” — a set dollar amount based on your family status. For the 2021 tax year, the standard deduction for single people or married people filing separately is $12,550. The 2021 deduction for a married couple filing jointly is $25,100, and if you’re filing as head of household, your standard deduction is $18,800.

You should always pick the option that reduces your adjusted gross income(AGI) the most, and about 90% of taxpayers choose the standard deduction.

Employment income

Employers can pay or provide, among other items, basic salaries, housing allowances, transport allowances, utilities, lunch allowances, leave allowances, club subscriptions, clothing allowances, leave passage, insurance premiums, and certain reimbursements to their employees. The entire list is fully taxable except for reimbursements supported with third party invoices/receipts and reasonable relocation expenses.

Employers may also provide cars and accommodation for their staff. If a company provides accommodation for an employee, the employee is taxed on the annual ratable value of the accommodation. If a car is allocated for an employee’s use, 5% of the cost of the car will be treated as benefit-in-kind that will form part of the employee’s taxable income.

The provision of canteen meals for staff is generally not treated as part of the employee’s taxable income. Reimbursements, such as car maintenance, are tax exempt to the extent that the expenses have been incurred and there is no element of profit to the employee.

Capital gains

The cost of the chargeable asset and the associated cost of disposal are deducted from the sales proceeds to determine the chargeable gains, which are subject to CGT at 10%. See Capital gains tax in the Other taxes section for more information.

Investment income

Dividends, interest, rent, or royalties derived and brought to Nigeria in convertible currency through government approved channels and paid into a local account in an approved bank is exempt from Nigerian tax.

Personal deductions

Charitable contributions

Donations made to research centres are deductible, subject to a maximum of 10% of an individual’s taxable income.

Healthcare expenses

Medical expenses and insurance premiums are deductible.

Life insurance premiums

Relief for life insurance premiums (not including deferred annuity) for the taxpayer and the taxpayer’s spouse is restricted to the actual premium paid to an insurance company by the individual during the year preceding the year of assessment.