Are health insurance premiums tax-deductible?
Health insurance premiums are deductible, but only in certain instances.
Self-employed workers – especially those who start a small business or who work as contractors – typically are the taxpayers most likely to deduct their health insurance premiums on tax returns.
If you are self-employed, you cannot deduct an amount that exceeds the income you earn in your business, and that you cannot take the deduction for any months when you were eligible for coverage through an employer-subsidized plan.
Most people obtain their health insurance through an employer, with the costs being shared by the employee and the employer. If you pay for health insurance premiums pre-tax, you cannot deduct the cost on your tax return.
However, if you pay for premiums after taxes are taken out of your paycheck, you might qualify for the medical expense deduction.
Just be aware that the hurdle for qualifying for the medical expense deduction is high: You can only deduct medical expenses that exceed 7.5% of your adjusted gross income. In addition, you must itemize deductions to qualify.
Also, if you purchased health insurance through the federal or a state marketplace and receive a tax subsidy that covers part of your costs, you can’t deduct this portion of your premiums.
When can you deduct medical expenses?
You can deduct medical expenses – including dental expenses – when they exceed 7.5% of your adjusted gross income.
Medical expenses generally include costs related to the diagnosis, cure, mitigation, treatment or prevention of disease. IRS Publication 502 includes a list of medical expenses that can be deducted.
Expenses that the IRS characterizes as "merely beneficial to general health" such as vitamins or vacation costs do not qualify for a medical expenses deduction.
To qualify to deduct medical expenses, you must itemize deductions when filing your tax return.
Are home insurance premiums tax-deductible?
In most cases, home insurance premiums are not deductible, at least on your primary residence. However, there might be situations where you can deduct a portion of these premiums.
For example, if you work out of your home and qualify for the home office deduction, you might be able to deduct a prorated portion of your homeowners insurance premiums.
If you own a rental property, homeowners insurance premiums for that home or apartment building are deductible.
Also, if you rent out a room or accessory dwelling unit (ADU) in your home, you can deduct a portion of your homeowners insurance premiums, says Dana Ronald, CEO of Tax Crisis Institute, which helps residents of California and Nevada with tax issues.
"For example, if you rent out an ADU for 10 months and use it for two months out of the year, you can deduct 90% of your insurance premiums," he says.
Are car insurance premiums tax-deductible?
Most drivers can’t deduct the cost of car insurance premiums, but there are exceptions to this rule.
Workers who are self-employed and use their car for business purposes are the most likely candidates for deducting car insurance premiums.
If you use a car solely for business purposes, you can deduct the entire cost of car insurance premiums on your return. However, if you use a car for both personal and business use, you can only deduct a prorated portion of the premiums.
For example, if you use the car 30% of the time for business, you can deduct 30% of premiums – and other car-related expenses – from your return.
If you choose to deduct car-related costs, you must use one – but not both – of the following methods of claiming a deduction:
- Standard mileage
- Actual vehicle expenses
If you choose the standard mileage option – which is 67 cents per mile for business trips in 2024 – you will not be able to deduct your car insurance premiums.
"Individuals who are self-employed or run a business from their home may find that deducting car insurance premiums is more beneficial than taking the standard mileage deduction," Ronald says.
Examples of such people include Uber or Lyft drivers, delivery drivers and those who use their cars for business purposes, he says.
There are a few other types of individuals who might be eligible to deduct auto insurance premiums. They include:
- Members of the armed forces reserves who have to travel up to 100 miles away from home
- Qualified performing artists
- Some state or local government officials
Is life insurance tax-deductible?
Life insurance premiums typically are not deductible. Unlike health insurance, life insurance premiums are considered to be a personal expense, which excludes them from being deductible.
There are some exceptions to this rule, however. If you must pay for life insurance premiums as part of alimony, you might be able to deduct that cost from your taxes. Also, if you donate your life insurance policy proceeds to a charity, you might qualify for a charitable deduction.
Another possible exception applies if you own a business. If the business pays for life insurance policies that belong to company executives or employees, these expenses would be deductible if the executive or employee reports the premium as income.
Are there any other insurance costs you can deduct on your taxes?
There are a handful of other insurance costs that might be tax-deductible in some circumstances.
For example, the IRS allows you to deduct disability insurance premiums if you are self-employed, but only in limited circumstances.
If you own a business and purchase various types of business insurance – including liability coverage and workers’ compensation insurance – these premiums typically are tax-deductible.
The medical expenses deduction also can allow you to deduct a host of insurance costs in some situations. These might include things such as long-term care insurance premiums and Medicare premiums.
Consult with a tax professional to learn more about which insurance costs might be tax-deductible.
