Premiums for private health insurance can be tax-deductible, as are health insurance premiums paid to an employer's plan. However, there are restrictions, as well as specific ways the deductions must be calculated, so make sure you've done your research and that you meet the requirements before taking this deduction.
Generally, you can deduct any medical expenses you pay for yourself and for anyone who was your spouse or your dependent when the services were provided or when you paid for them. However, keep in mind that if your health insurance premiums are paid through your employer, those premiums probably are paid with pretax dollars and you can't take the deduction twice.
Premiums paid for private health insurance can be included with other medical and dental expenses as itemised deductions on Schedule A, Form 1040. However, you can deduct only the amount of these expenses that exceeds 7.5 per cent of your adjusted gross income, which can be found on line 38 of Form 1040. So you must subtract 7.5 per cent of your adjusted gross income from your medical expenses to determine your allowed medical-expense deduction.
However, if you are self-employed or a partner in a partnership or a shareholder in an S corporation, the private health insurance premiums can be claimed in a more advantageous way. Instead of claiming them as an itemised medical expense deduction, you can claim them as an adjustment to your gross income (line 29, Form 1040) and deduct them directly from your income.
Premiums that are deductible include those paid for insurance policies that provide coverage for such health-related expenses as hospitalisation, doctor visits, surgical fees, X-rays, prescription drugs or even contact lenses. Premiums for a long-term care insurance contract are also tax-deductible.
The premiums paid for some similar policies are not tax-deductible. These include life insurance policies, disability insurance policies, accidental death or dismemberment policies and the part of your car insurance premium that provides medical insurance coverage for people injured in or by your car.