Medishare premiums are not tax deductible for most people, because Medishare is not health insurance

Medishare is a cost-sharing ministry, not a traditional health insurance plan. The IRS treats it differently from Blue Cross, Aetna, or other insurance companies. Because Medishare members share medical costs through a faith-based community rather than through an insurance contract, the IRS does not allow you to deduct Medishare premiums (called "shares") as a medical expense on your federal tax return.

This distinction matters because it affects both your tax filing and your health coverage options. If you are self-employed or own a business, you cannot deduct Medishare shares under the self-employed health insurance deduction. If you are an employee, you cannot contribute to a Health Savings Account (HSA) or Flexible Spending Account (FSA) while enrolled in Medishare, because the IRS does not recognize it as a may have access to high-deductible health plan.

The same rule applies to other faith-based cost-sharing ministries like Samaritan Ministries and Christian Healthcare Ministries. Only premiums paid to licensed health insurance carriers—including short-term health plans and major medical plans—may have access to for tax deductions.

Key Takeaways

  • Medishare shares cannot be deducted as medical expenses because Medishare is a cost-sharing ministry, not health insurance.
  • Self-employed people cannot use the self-employed health insurance deduction for Medishare premiums.
  • You cannot open or contribute to an HSA or FSA while enrolled in Medishare, because the IRS does not recognize it as may have access to coverage.
  • If you switch from Medishare to a traditional health insurance plan, premiums paid to that insurance company may be deductible depending on your income and filing status.

Why the IRS treats Medishare differently from insurance

The IRS defines health insurance as a contract between you and an insurance company, where the company agrees to pay a portion of your medical bills in exchange for a premium. Medishare operates on a different model: members contribute a monthly share, and the ministry distributes those funds to pay the medical bills of members who submit claims. No insurance company is involved, and no insurance contract exists.

Because Medishare is not licensed as an insurance carrier in any state, the IRS does not classify it as health insurance for tax purposes. This is not a judgment about whether Medishare works or whether members are satisfied—it is a technical classification based on how the IRS defines insurance. The same rule applies to all faith-based cost-sharing ministries that operate on a similar model.

This classification also affects your health coverage status. For purposes of the Affordable Care Act (ACA), Medishare is considered a "health care sharing ministry" and members are exempt from the individual mandate. However, that exemption does not make Medishare deductible for tax purposes.

What you can deduct if you leave Medishare for traditional insurance

If you switch from Medishare to a traditional health insurance plan, the premiums you pay to that insurance company may be deductible, depending on your situation. Self-employed people can deduct health insurance premiums under the self-employed health insurance deduction, up to the amount of your net self-employment income. Employees cannot deduct premiums directly, but they can contribute to an HSA or FSA if their plan qualifies.

The timing matters: you can only deduct premiums for months when you actually held the insurance policy. If you switch plans mid-year, you deduct only the premiums for the months you were enrolled. Keep your insurance statements and premium payment records to support the deduction.

If you are unemployed or between jobs, you may be able to deduct COBRA premiums (the continuation coverage you can purchase after leaving a job) or premiums for a plan you purchase on the individual market. The rules vary depending on your income and whether you are self-employed, so review your specific situation with a tax professional.

How Medishare affects your HSA and FSA options

A Health Savings Account (HSA) is a tax-advantaged savings account that only people enrolled in a high-deductible health plan (HDHP) can open. Because Medishare is not recognized as an HDHP, you cannot open an HSA while enrolled in Medishare. If you already have an HSA from a previous insurance plan, you can continue to use it for may have access to medical expenses, but you cannot make new contributions while you are a Medishare member.

The same restriction applies to Flexible Spending Accounts (FSAs), which are employer-sponsored accounts that let you set aside pre-tax money for medical expenses. If your employer offers an FSA, you can only participate if you are enrolled in a may have access to health plan. Medishare does not count, so you would need to switch to a traditional insurance plan to use an FSA.

If you are considering Medishare partly for cost reasons, factor in the loss of HSA and FSA tax advantages. These accounts can save you 20 to 40 percent on medical expenses through tax savings, so the comparison between Medishare and a traditional plan should include that difference.

Documenting medical expenses if you are a Medishare member

Even though Medishare shares are not deductible, you can still deduct other medical expenses that exceed 7.5 percent of your adjusted gross income (AGI). These include prescription drugs, dental work, vision care, medical equipment, and certain other costs that Medishare does not cover or only partially covers.

Keep receipts and statements for all out-of-pocket medical expenses, including amounts you paid to Medishare members or providers that Medishare did not cover. If you itemize deductions on your tax return (rather than taking the standard deduction), you can include these expenses in your medical deduction calculation. However, most people do not itemize, so this deduction is only useful if your total itemized deductions exceed the standard deduction for your filing status.

To calculate whether you can deduct medical expenses, add up all your may have access to medical costs for the year, subtract 7.5 percent of your AGI, and deduct the remainder only if you are itemizing. A tax professional can help you determine whether itemizing makes sense for your situation.

What to tell your tax preparer about Medishare

If you work with a tax preparer or accountant, tell them upfront that you are enrolled in Medishare, not traditional health insurance. This prevents them from accidentally treating Medishare shares as deductible insurance premiums, which would be incorrect and could trigger an audit.

Provide your preparer with the total amount you paid in Medishare shares during the year. You can find this on your Medishare statements or year-end summary. Also provide documentation of any other medical expenses you paid out of pocket, in case you are itemizing deductions and want to include them in your medical expense calculation.

If you switched from Medishare to a traditional insurance plan during the year, provide statements showing the dates you were enrolled in each plan and the premiums you paid. This ensures your preparer deducts only the premiums for months when you held may have access to insurance.

Frequently Asked Questions

Can I deduct Medishare shares as a self-employed person?

No. The self-employed health insurance deduction only applies to premiums paid to licensed health insurance carriers. Medishare is a cost-sharing ministry, not an insurance company, so shares do not may have access to. If you switch to a traditional health plan, you can deduct those premiums.

What if my employer reimburses my Medishare shares?

If your employer reimburses you for Medishare shares, that reimbursement is taxable income to you and cannot be excluded from your wages. Employer reimbursements for health insurance premiums are tax-free only if the insurance is a may have access to plan. Medishare does not may have access to.

Can I use a Health Savings Account while I am in Medishare?

No. HSAs are only available to people enrolled in a high-deductible health plan (HDHP). Medishare is not recognized as an HDHP by the IRS. If you have an HSA from a previous insurance plan, you can use it for medical expenses, but you cannot make new contributions while enrolled in Medishare.

Do I have to report Medishare on my tax return?

You do not report Medishare shares as a deduction on your tax return. However, you should report it to your tax preparer so they understand your health coverage situation and do not accidentally claim it as a deduction. Medishare members are exempt from the ACA individual mandate, but you do not need to file a separate form—the exemption is automatic.

If I switch to insurance mid-year, can I deduct both Medishare and insurance premiums?

You can deduct only the insurance premiums, not the Medishare shares. Deduct the insurance premiums only for the months you were enrolled in that plan. Keep statements showing the dates your coverage began and ended.