Paige Cerulli Last Updated On: March 20, 2024

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Are Insurance Premiums Tax Deductible?

When you file your taxes, maximizing your deductions can reduce the amount you owe or even increase the size of your refund. But many taxpayers overlook important deductions, often because they’re unaware of them. So, are insurance premiums tax deductible? The answer depends on the type of insurance and a few other factors.

Tax on insurance premium

Health Insurance Premiums

You may be able to deduct your health insurance premiums. If you are self-employed and responsible for all your premium payments, you can deduct those premiums from your taxes.

If you’re a W-2 employee, you must itemize your deductions, and you will only be able to deduct your out-of-pocket premium payments. You cannot deduct your employer’s contributions to your health insurance.

There’s a catch, though – if you’re a W-2 employee, you can only deduct your health insurance premiums if they total more than 7.5% of your Adjusted Gross Income (AGI). Your AGI is your income before taxes, minus expenses like student loan interest and retirement account contributions.

In other words, your health insurance premiums may need to be pretty high to qualify as a deduction. But, you can add them to other medical expenses, like preventive medical care, mental health services, and treatments for certain diseases. Even if your health insurance premiums are low, if you’ve had significant health care costs during the tax year, those costs and your premiums combined may be high enough to qualify for a tax deduction.

Long-Term Care Insurance

Long-term care insurance premiums may be tax deductible, and you may be able to include these premiums under your medical expenses deduction. Keep in mind that just as your insurance premiums and medical expenses must be more than 7.5% of your AGI, your long-term care insurance must meet that same requirement. But, you can add long-term care insurance premiums to those other expenses, which may help to bring the total up to the required minimum and increase your deduction.

Life Insurance

As an individual, you usually can’t deduct life insurance premiums. But if you’re running a business and pay life insurance premiums on behalf of your employees, those premiums may qualify as a business tax deduction.

Homeowners Insurance

Your homeowners insurance usually isn’t tax deductible unless you use your home as a source of income. You could potentially write off your homeowners insurance premiums if you have a home-based business and use part of your home as an office. If you rent out your home as an Airbnb, you could write off your insurance. Additionally, if your home is strictly an investment property, your insurance may be tax deductible

Private Mortgage Insurance

You may be paying private mortgage insurance, or PMI if you made a down payment that was less than 20% of your home’s purchase price when you bought your house. Many lenders require lenders with smaller down payments to pay PMI, and those costs can add up.

Currently, PMI is not tax deductible, but the rules regarding deductions can change, and you might be able to deduct PMI payments in the future.

How to Deduct Insurance Premiums

In many cases, you can deduct your insurance premiums from your taxes, but the rules and requirements vary depending on your employment status and your insurance type. To ensure that you’re correctly deducting your premiums, and to decide whether it makes sense to use standard deductions or itemize your deductions, it’s always a good idea to consult with a tax professional.

Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.

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