Is Private Health Insurance Tax Deductible?

Most Americans want to save as much as possible on their healthcare expenses. Although costs declined slightly from 10.9% to 9.3% in 2024, rising expenses are predicted for the next few years. One way to save is to take advantage of special health insurance tax deductions. These allow you to deduct medical expenses and out-of-pocket health insurance premiums from your tax return, so you pay less overall.

Understanding how these tax benefits work and whether you qualify with a private health insurance plan can help you reduce costs and keep your hard-earned money. 

What Health Insurance Tax Deductions are Available?

The IRS offers several options for deducting healthcare expenses, including:  

• Medical expense deductions: This lets you deduct out-of-pocket medical costs for medical expenses like doctors, hospital services and dentists. To qualify, you must itemize your deductions on Form 1040, and the total amount has to exceed 7.5% of your adjusted gross income (AGI) for the tax year.

• Self-employed health insurance deduction: Self-employed individuals who buy their own health insurance can deduct the cost of premiums. This includes premiums for your spouse, children or dependents. The expenses are deducted from your taxable income, reducing your overall tax liability.

• Premium deductions: With this deduction, you can deduct the amounts you pay for health insurance premiums that aren’t covered by an employer or are paid out-of-pocket after tax. For instance, you can deduct the cost of long-term care insurance premiums or medical care.

• Contributions to an HSA: You can deduct contributions to a health savings account (HSA) from your taxable income. This lowers your taxable income for the year.

• Premium tax credit: The premium tax credit is not a deduction but a refundable credit for low-income individuals who purchase insurance through the government marketplace. If you use less of this credit than you qualify for during the year, the difference is refunded when you file your taxes. 

Which Deductions Can You Qualify for With Private Insurance?

When you purchase an affordable private health insurance plan, you could qualify for one of the IRS deductions. A private insurance plan means you select and pay for your coverage out-of-pocket, unlike employer-sponsored health insurance, where your premiums are taken out of your paycheck pre-tax. 

Since you pay your own premiums with private insurance, a private plan automatically qualifies you for the premium deduction credit. If you have a private small business insurance plan, you could file for the self-employment deduction instead. This means you’ll get to deduct the cost of all premiums you paid that year. 

If your medical expenses exceed 7.5% of your AGI, you could also itemize deductions on your income tax return to get a deduction for any medical costs not covered by your private insurance plan. These expenses can include:

• Fees for doctors, dentists and other medical practitioners

• Inpatient hospital and residential nursing home care for medical reasons

• Costs for insulin, prescription medicines and drugs

• Purchase of medical aids like false teeth, eyeglasses, hearing aids and service animals

• Transportation costs directly related to medical care, including mileage, parking and fares

You can only deduct each cost once, so the best idea is to work with a tax professional to ensure that you don’t double dip – or accidentally deduct the same expenses more than once. A tax preparer can also help you take advantage of all deductions or credits you qualify for, saving you money. 

How to File for a Health Insurance Tax Deduction

Claiming a tax deduction for private health insurance you bought at any time within the tax year requires a few simple steps. Do the following to get your deduction: 

• Gather documentation: Keep all receipts and records of health insurance premiums and medical expenses throughout the year. Documentation should include invoices, bank statements and payment confirmations for your private plan and medical services.

• Fill out the IRS forms: Use IRS Form 1040 to report your income and attach Schedule A to itemize your deductions. For the self-employment premium deduction, you’ll use Form 7206. 

• Calculate your deduction: Add up all deductible medical expenses, including health insurance premiums, that exceed 7.5% of your AGI. Use the total to calculate your deduction on Schedule A.

• File your tax return: Submit your completed forms and documentation. Ensure you file by the tax deadline (typically April 15) or request an extension if more time is needed. Keep a copy of your tax return and all supporting documents for at least three years in case of an IRS audit.

If you’re curious about switching from a traditional plan to a private option to claim a deduction next year, this guide to buying private health insurance can help you choose the right plan. 

Get Affordable Private Health Insurance for Better Tax Benefits

Private health insurance is an ideal option if you’re self-employed, between jobs or have a specialized career like nursing, trucking or real estate. Our United National Healthcare private insurance plans allow customized coverage that meets your needs and helps qualify you for possible tax benefits like premium or medical expense deductions. 

To find private health insurance near you, contact our team today. We can walk you through your coverage options and help you find a plan that provides the necessary medical care while saving you money.