Employer Plans

• Most people with insurance have it through an employer plan. This means they participate in a group health insurance plan, and their employer likely pays part of the insurance premium for them. If this is the case, you cannot deduct your health insurance premium on your income tax returns. You most likely do not pay the full premium because of your employer contribution, but even if you do, the Internal Revenue Service does not allow a deduction in this situation.
  
  

Self-Employed Individuals

• If you are self-employed and you buy your own health insurance, you possibly can deduct your premiums. This is deducted as a business expense, which means you also can avoid paying self-employment taxes on the amount of your premiums. The deduction is calculated on a month-to-month basis. You can only take the deduction for months in which you were not eligible for a group insurance plan through your work or through a spouse's work. Your business also must show a profit for the year to take this deduction.
  
  

Total Medical Expenses

• Although this is less common, some people can deduct part of the premiums they pay as a percentage of their total medical bills. If you pay an amount that is greater than 7.5 percent of your total annual income in medical bills, you can deduct a portion that is over 7.5 percent. This would require you to add up your health insurance premiums and all other medical bills to arrive at a total greater than 7.5 percent of your income.
  
  

Long-Term Care Premiums

• If you are self-employed, you can not only deduct your health insurance premiums, but you can also deduct part of the premiums that you pay for long-term care insurance. Long-term care insurance is designed to help you pay for expenses such as living in a nursing home at some point in the future. When you pay long-term care premiums, the IRS has a schedule for the maximum amount you can deduct each year, depending on your age.