Navigating the complexities of healthcare expenses and their tax implications can be challenging, especially with evolving regulations and alternative health coverage options. Many individuals wonder whether their contributions to health sharing organizations can be deducted on their federal tax returns. While these organizations offer a lower-cost alternative to traditional health insurance, the tax treatment of their membership fees varies, and understanding these nuances is crucial for making informed financial decisions. This guide explores the current status of health sharing contributions in relation to tax deductions, the nature of these ministries, and what potential policy changes might mean for members.
Is Funding a Health Sharing Organization Tax-Deductible?
Typically, taxpayers can deduct certain medical expenses, including health insurance premiums, when itemizing deductions on their federal returns. However, contributions to health sharing ministries are generally not classified as insurance, and therefore, they do not qualify for the same tax benefits. These ministries operate as nonprofit organizations that facilitate the sharing of qualifying medical costs among members, but their payments are not recognized as insurance premiums by the IRS.
Despite this, many participants opt for health sharing programs because the monthly contributions tend to be significantly lower—sometimes up to 50% less—compared to traditional health insurance premiums. This cost-saving benefit remains attractive, particularly for those who do not qualify for premium subsidies under the Affordable Care Act. Although these contributions are not tax-deductible, the overall savings in premiums can make health sharing a financially appealing alternative.
Understanding Health Sharing Ministries
Health sharing ministries are nonprofit entities that coordinate the sharing of eligible medical expenses among their members. Members pay periodic contributions—monthly, quarterly, or annually—that help fund healthcare costs for other members with qualifying medical needs. When someone incurs an eligible expense, they submit their bill to the ministry, and fellow members contribute toward covering that expense.
Some of the most prominent health sharing programs include:
- OneShare Health
- HSA Secure
- Medi-Share
- netWell
- Altrua Healthshare
- Universal HealthShare
- 1Complete Solution
- DPC Direct
- JHS Community
- Universal Thrive
Further details about each organization can be found here. These programs vary in coverage, cost, and member requirements, but all serve as alternatives to traditional insurance by fostering community-based expense sharing.
Is Health Sharing Worth It Without Tax Benefits?
For many individuals, the appeal of health sharing ministries lies in the substantial monthly cost savings. Often, these programs charge up to half the premiums of traditional insurance plans, making them especially attractive to those who are cost-conscious or ineligible for subsidies.
For example, data from the Kaiser Family Foundation indicates that a typical family health insurance plan exceeds $22,000 annually without subsidies. For a self-employed family in a 25% tax bracket, this translates to an after-tax cost of approximately $16,500. In contrast, joining a health sharing community with an annual contribution of around $11,000 could result in before-tax savings of that amount, and after-tax savings of roughly $3,500.
Additionally, health sharing members often enjoy greater flexibility in choosing healthcare providers since these ministries generally do not impose network restrictions common in traditional plans like HMOs or PPOs. Although subsidies under the ACA and American Rescue Plan can reduce premium costs, families who earn too much to qualify for such assistance still find health sharing to be a cost-effective option, despite the lack of tax deductibility.
How Are Medical Expenses Treated for Tax Purposes?
Understanding how the IRS classifies and handles medical expenses is essential. Generally, expenses paid for health insurance premiums are considered deductible if certain conditions are met. When itemizing deductions using Schedule A (Form 1040), taxpayers can deduct qualified medical and dental expenses paid during the year for themselves, their spouse, and dependents, but only to the extent that these expenses exceed 7.5% of their adjusted gross income (AGI).
Tax Implications for Health Insurance Premiums
Self-employed individuals may qualify for the Self-Employed Health Insurance Deduction, which allows them to deduct health insurance premiums directly from their income. This adjustment to income is not subject to the 7.5% AGI threshold and can provide significant tax relief. Detailed rules and eligibility criteria are outlined in Publication 535, Business Expenses.
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Conversely, those who are not self-employed generally cannot claim this deduction and must rely on itemized deductions if applicable. To determine the most beneficial approach, taxpayers should evaluate both standard and itemized deductions, considering current IRS thresholds, which as of 2021, were $12,550 for singles and $25,100 for married filing jointly.
For comprehensive guidance, IRS Publication 502 provides detailed information on deducting medical and dental expenses, including health insurance costs.
Should You Itemize or Take the Standard Deduction?
Deciding whether to itemize or claim the standard deduction depends on individual circumstances. The standard deduction amounts are adjusted annually; for 2021, they were $12,550 for single filers, $25,100 for married couples filing jointly, and $18,800 for heads of household.
Taxpayers should compute their taxes both ways—itemizing and taking the standard deduction—and choose the method that results in the lowest tax liability. Consulting a tax professional can help determine the most advantageous approach based on specific financial situations.
Implications for Businesses and Employers
From a business perspective, payments made towards health benefits—whether as traditional insurance premiums or contributions to health sharing ministries—are generally tax-deductible as business expenses. However, for employees, health sharing contributions are typically considered taxable benefits, unlike employer-paid health insurance premiums, which are usually tax-free.
Potential Regulatory Changes
The IRS and U.S. Department of the Treasury have proposed regulations under Section 213 of the Internal Revenue Code that could recognize amounts paid for health sharing memberships as deductible medical expenses. These proposed rules also include costs associated with direct primary care (DPC) plans. If implemented, this could significantly improve the tax treatment of health sharing contributions, making them more financially accessible.
However, current administration policies do not favor these proposals, and as such, they have not yet been adopted. Staying informed about policy updates is advisable for those considering health sharing programs.
Further Questions About the Tax Benefits of Health Sharing
This overview provides a broad understanding but does not cover every individual scenario. For personalized advice, consult a qualified CPA or tax advisor. They can evaluate your specific circumstances and determine the best strategy regarding health sharing contributions and deductions.
For additional resources and to explore the most recommended health sharing plans, visit our Healthshare Plans page. There, you can request instant quotes and enroll online.
Since 2004, HSA for America has supported thousands in finding affordable, high-quality healthcare options. Reach out to us for expert guidance tailored to your needs.
Additional Resources
Here are some valuable articles on health sharing organizations and related healthcare topics:
- All You Need to Know About Healthshare Plans
- Healthshare FAQs
- Best Healthshare Plans Comparison Guide 2026
- Complete Guide to Direct Primary Care
- 26 CFR § 1.162(l)-1 – Deduction for health insurance costs of self-employed individuals