Merritt Personal Lines Manual: Chapter 2 Tax Considerations

There are two times in health insurance when there may be tax considerations: in the payment of premiums and the receipt of benefits.

Tax Treatment of Individual Health Insurance

Premiums Benefits
Medical Expense Not tax deductible Received tax free
Disability Income Not tax deductible Received tax free
Long Term Care Tax deductible Received tax free

Tax Treatment of Group Health Insurance

Premiums (paid by employer) Benefits
Medical and Dental Expense Tax deductible for the employer, not considered as income for the employee Received tax free
Accidental Death Tax deductible for the employer, not considered as income for the employee Received tax free
Disability Income If the policy is individually owned, but the employer pays the premium, the premiums must be included in the taxable earnings of the employee Received tax free
Long Term Care Tax deductible for the employer Received tax free

Self employed individuals can deduct their health insurance premiums as business expenses. In the early 2000s, they could deduct 70 percent; since 2003, they have been able to deduct 100 percent.

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