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General Rule: A tax deduction is allowed for premiums paid for medical insurance for the taxpayer, the taxpayer's spouse and dependents. This also includes contact lens insurance and the additional cost of Medicare B insurance. The deduction is taken on Schedule A - Itemized Deductions - of Form 1040.

Exception: Premium's reimbursed by an employer are not deductible. If medical premiums are paid under an insurance contract for additional benefits (such as indemnity for loss of sight, hearing loss of lime, income or life) than no amount paid for the insurance is deductible unless the medical portion of the total premium is separately stated.

Health insurance costs for self-employed persons. If you were self-employed and had a net profit for the year, were a general partner (or a limited partner receiving guaranteed payments), or received wages from an S corporation in which you were a more than 2% shareholder (who is treated as a partner), you may be able to deduct the amount paid for health insurance on behalf of yourself, your spouse, and dependents.

You take this deduction on Form 1040. If you itemize your deductions, include the remaining premiums with all other medical care expenses on Schedule A, subject to the 7.5% limit.

You may not take the deduction for any month in which you were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer.

If you qualify to take the deduction, use the Self-employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct.

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