Health Insurance Premium Tax Deductions

Here are the general rules regarding tax deductibility of premiums paid by health insurance policyowners:

  • Premiums paid by individuals for their health insurance policies normally ARE NOT tax deductible; however, if the individual itemizes deductions and the total of premiums and unreimbursed medical expenses exceed a certain amount of adjusted gross income (5% in tax years 2017/18 and 10% in tax years 2019 and after), the excess amount is tax deductible.
  • Premiums paid by employers for health insurance policies that benefit employees and/or their families ARE a tax deductible business expense.
  • Premiums paid by businesses for business overhead expense (BOE) disability income insurance ARE a tax deductible business expense.
  • Premiums paid by businesses for disability income insurance related to buy-sell agreements or key person insurance ARE NOT tax deductible.

If the individual payor of health insurance premiums receives a tax deduction, the premiums are said to be paid with pre-tax (before-tax) dollars.

If the individual payor of health insurance premiums does not receive a tax deduction, the premiums are said to be paid with after-tax dollars.