Can Health Insurance Payments Be Deducted? 
Health insurance paid by an employer for coverage on an employee or the employee ' s dependents is deductible as a normal business expense under IRC Section 162 . Health insurance benefits are not wages and therefore are not subject to wage taxes . For this purpose , the term `` employee '' includes an owner/employee of a C-corporation but does not include owner employees of other types of businesses . Self-employed individuals may deduct 100 % of the cost of health insurance as an `` above the line '' expense on the front page of their Form 1040 . The deduction is available to all qualifying taxpayers , regardless of whether they choose to itemize their other expenses . Direct deductions from gross income are allowed only to the extent of the amount of net self-employment income . Excess amounts , if any , may be deducted of Schedule A as listed in the `` Individuals '' section below . The term `` self-employed person '' for this purpose includes non-salaried owners of S-corporations , LLCs , partners and sole proprietors underIRC Section 162i . WEBSITELINK Except for salaried owner/employees , health insurance paid by a business on behalf of a self-employed person is not a deductible business expense . For example , if an S-corporation that pays for health insurance for its non-salaried owner/employee , this expense is not listed as a business expense on the Form 1120 but rather the deduction flows directly through the Form 1120S to the individual owner ' s Form 1040 . Health insurance for salaried owner/employees is treated the same as regular employees except that an adjustment for self-employment tax is made . Health insurance benefits provided by an employer are not taxable income underIRC section104and105 . This includes amounts paid by the employer to reimburse the employee for the cost of health insurance . Of course , the employee may not `` double-dip '' by deducting the cost of these tax-free benefits on an individual tax return . The cost of health insurance paid by individuals is tax deductible only to the extend that the cost of coverage they paid , in combination with some other specified expenses , is more than 7.5 % of adjusted gross income . For most people , this limitation effectively means that they do not get a tax deduction for the cost of health insurance paid . The cost of health insurance paid by an employer is a deductible personal expense if the amount is included as wages in Box 1 of Form W2 , but this is a relatively rare situation . 