Individuals and Families

Utilizing health insurance coverage may seem simple as you pay a certain amount and the insurance company pays the rest. When tax time comes around, however, what to claim can be quite confusing. First, you do not need to include employer-paid premiums in your income. This includes premiums covering you, your spouse, and any children. This also includes premiums paid by your employer when you are laid off from work. Generally, if your employer reimburses you for premiums you paid for, the amount of reimbursement is not taxable income. The only exception to this is if your employer pays you a general amount that may be used for any purpose including premiums reimbursement. These amounts are taxable. Typically, the premiums you pay on your personal health insurance policy won't be deductible. The exception to this rule is if you itemize deductions on Schedule A and the unreimbursed medical expenses exceed 7.5 percent of your adjusted gross income. You can also deduct the amount in unreimbursed medical expenses that exceed 7.5 percent. Unreimbursed typically means physician costs, hospitalization, and other medical treatment as well as other amounts paid out of pocket for treatment not covered by your health insurance. For self-employed individuals, the rules may vary. Health insurance benefits are not usually taxable, however, if you are self-employed, you can deduct a percentage of your health insurance premiums as business expenses. These deductions are limited to amounts less than an individual's earned income, rather than being limited to amounts over 7.5 percent.