How to Deduct an Insurance Premium Under Employer Sponsored Health

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The Internal Revenue Service permits taxpayers to claim a tax deduction for qualifying medical costs, including out-of-pocket health insurance premiums, on their taxes. The deduction is an itemized deduction, meaning you must give up your standard deduction, file your taxes with form 1040 and complete Schedule A. Though a deduction can save you money, you need to make sure that you are not deducting pretax contributions to your health insurance plan.

Calculate the total value of your after-tax premiums that you were not reimbursed for by your company. For example, if you paid $100 per month out-of-pocket for your health plan, you would have paid $1,200. However, if your employer takes out that money before taxes, so that the money is not included in your taxable income on your W-2 form, you cannot claim a tax deduction for those expenses.

Add the deductible costs of your insurance premiums to any other qualifying medical expenses you incurred during the year. Qualifying medical expenses can include, but are not limited to, doctor's visits, preventative care, treatment, dental work and vision care.

Report the total amount of your qualifying medical expenses on Line 1 of your Schedule A.

Copy your adjusted gross income from line 37 of your form 1040 tax return to Line 2 of your Schedule A.

Multiply your adjusted gross income by 0.075 and write the result on Line 3 of Schedule A. For example, if your adjusted gross income was $35,000, you would get $2,650.

Subtract the result from Step 5 from your total qualifying medical expenses and write the result on Line 4 of your Schedule A to claim the deduction. In this example, if you had $4,650 in medical expenses, you would be able to claim a $2,000 deduction.


  • If your itemized deductions do not exceed your standard deduction, you are better off not claiming the health-care costs tax deduction.