Answer: That depends on who you are and who you work for.
If you're self-employed, the answer often is yes -- the premiums you pay to cover yourself and your dependents probably are tax-deductible. (They are not, however, if you, your spouse or your dependents are covered by another employer's group plan.)
If you work for a company that offers health insurance coverage as part of what's known as a cafeteria plan -- a benefit that allows you to spend money on such things as health care and child care without paying taxes on it -- your share of the premium costs is probably paid before taxes. That means your out-of-pocket premium expenses are not counted toward your taxable income, so you're good to go -- tax-free.
If you're not self-employed, and you don't work for a company that provides health insurance with a cafeteria plan, you may be out of luck. But there is a possible out. The Internal Revenue Service allows you to count health and dental insurance premiums as part of the 7.5% of your adjusted gross income that has to be spent on health care before any out-of-pocket medical expenses can be deducted.
Types of Deductible Health Insurance
Got all that? Wait -- there's more.
Only premiums that pay for healthcare insurance can be deducted. They include policies that cover standard things like doctor visits, hospital stays, prescription drugs, eye care and dental care, along with some types of long-term care insurance and, in some cases, memberships in medical co-ops that provide care.
Any other type of insurance tends to be out of the running for a deduction, even if it's vaguely related to you getting sick. That includes life insurance policies; disability insurance that pays part of your salary if you become sick or disabled; policies that pay if you lose a limb or your sight; policies that pay specific bills for you if you become sick or disabled; and policies that pay you a set amount each week if you are hospitalized.
Strategies to Maximize Your Deductions
If you fall into the category of folks who have to pay their own way in the health insurance world, it will be in your best interest to group any expensive procedures into a single year, if you can.
You can only deduct the portion of your out-of-pocket medical expenses that exceeds 7.5% of your adjusted gross income, which is the number at the bottom of the front page of your 1040 tax form. Health insurance premiums can be counted toward that 7.5%. A long list of expenses also can be deducted, including many over-the-counter medications and optional surgical procedures, like laser eye surgery to correct vision. The IRS has a list on its website.
It's best, therefore, to plan and to keep complete records of everything, so at least part of your expenses can escape a tax bill.