Yes, though there are significant differences between the treatment of health insurance premiums for tax purposes for persons with individual and group health insurance policies.
If you are self-employed and purchase individual health insurance then this expense can be deducted directly on your Form 1040 as an adjustment to income. This will help reduce your taxable income and thus your income tax, it will not, however, reduce your self-employment tax. For the self-employed using a high deductible plan paired with a Health Savings Account (HSA) then amounts contributed towards the HSA also reduce your taxable income while setting aside tax sheltered dollars for future use. Of course, other medical expenses not reimbursed by health insurance are a deduction as well but these expenses must exceed 10% of your Adjusted Gross Income, a very high hurdle to clear unless you are dealing with some very serious, high cost health problems. The higher 10% threshold is one of the consequences of the Affordable Care Act as the threshold was previously set at 7.5%.
For employed persons who get employer sponsored health insurance the income tax impact is usually experienced through the use of an employer sponsored Section 125 plan. Section 125 of the IRS code allows for employee contributions towards health and other eligible insurance plans to be taken out of the employee's paychecks on a pre-tax basis. Deducting employee contributions on a pre-tax basis reduces the employee's gross income and thus lowers their net taxable income resulting in lower Federal income tax, Social Security tax and state income tax (if applicable in your state) withholding amounts by an amount roughly equivalent to the employee's tax bracket. Eligible medical expenses not reimbursed or covered by the employer based health plan are a deductible expense though they are subject to the same 10% of Adjusted Gross Income threshold as described previously. Employee contributions to a Health Savings Account for an employer sponsored HSA eligible high deductible health insurance plans reduce the employee's taxable gross income in the same way was described in the previous paragraph.
Of course, you should discuss your particular tax situation and strategy with you CPA and/or tax lawyer as everyone's situation is unique.
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If you are self-employed and purchase individual health insurance then this expense can be deducted directly on your Form 1040 as an adjustment to income. This will help reduce your taxable income and thus your income tax, it will not, however, reduce your self-employment tax. For the self-employed using a high deductible plan paired with a Health Savings Account (HSA) then amounts contributed towards the HSA also reduce your taxable income while setting aside tax sheltered dollars for future use. Of course, other medical expenses not reimbursed by health insurance are a deduction as well but these expenses must exceed 10% of your Adjusted Gross Income, a very high hurdle to clear unless you are dealing with some very serious, high cost health problems. The higher 10% threshold is one of the consequences of the Affordable Care Act as the threshold was previously set at 7.5%.
For employed persons who get employer sponsored health insurance the income tax impact is usually experienced through the use of an employer sponsored Section 125 plan. Section 125 of the IRS code allows for employee contributions towards health and other eligible insurance plans to be taken out of the employee's paychecks on a pre-tax basis. Deducting employee contributions on a pre-tax basis reduces the employee's gross income and thus lowers their net taxable income resulting in lower Federal income tax, Social Security tax and state income tax (if applicable in your state) withholding amounts by an amount roughly equivalent to the employee's tax bracket. Eligible medical expenses not reimbursed or covered by the employer based health plan are a deductible expense though they are subject to the same 10% of Adjusted Gross Income threshold as described previously. Employee contributions to a Health Savings Account for an employer sponsored HSA eligible high deductible health insurance plans reduce the employee's taxable gross income in the same way was described in the previous paragraph.
Of course, you should discuss your particular tax situation and strategy with you CPA and/or tax lawyer as everyone's situation is unique.