Health Premiums Reduce Your Tax Bill
One often-overlooked advantage of private health insurance (private Krankenversicherung, PKV) in Germany is that premiums for basic cover are tax-deductible as pension and provision expenses (Vorsorgeaufwendungen). Thanks to the Bürgerentlastungsgesetz, contributions to basic health and long-term care insurance are fully deductible, meaningfully reducing your taxable income.
The key idea: the portion of your premium that buys GKV-equivalent "basic" cover is fully deductible. Premium parts for comfort extras (single room, chief physician, higher daily sickness benefit) are treated differently and may not be fully deductible.
What Counts as Basic Cover
Insurers split your premium into a basic component (the GKV-equivalent benefits everyone is entitled to) and supplementary components (comfort and choice benefits). Each year your insurer issues a certificate showing how much of your premium qualifies as deductible basic cover. This basic portion — plus your long-term care insurance (Pflegeversicherung) — is what you enter as fully deductible Vorsorgeaufwendungen.
| Premium component | Tax treatment |
|---|---|
| Basic health cover | Fully deductible |
| Long-term care (Pflege) | Fully deductible |
| Single room, chief physician | Comfort extras — limited deductibility |
| Krankentagegeld | Generally not part of basic deduction |
How the Deduction Works in Practice
When you file your tax return (Steuererklärung), you enter the deductible amounts from your insurer's certificate in the provision-expenses section. Because basic health and care contributions are fully deductible, they directly lower your taxable income — and for higher earners the effect can be substantial. The deduction applies whether you are employed or self-employed; the self-employed deduct the full premium they pay, while employees deduct their share net of the employer subsidy.
Prepaying Premiums: A Useful Strategy
There is a special opportunity: you can prepay future basic-cover premiums (up to about two and a half years in advance) and deduct them in the year of payment. In a high-income year this can shift deductions forward and free up room in later years to deduct other provision expenses (such as liability or disability insurance) that are normally crowded out by health contributions. This is a planning tool worth discussing with a tax adviser.
Practical Tips
- Keep your annual premium certificate (Beitragsbescheinigung) — it states the deductible amounts
- Separate basic from comfort components as your insurer reports them
- Consider prepaying in high-income years to optimise deductions
- Include long-term care contributions, which are also fully deductible
Used well, the Vorsorgeaufwendungen deduction means the state effectively shares part of your PKV cost — a benefit worth claiming in full every year.
Frequently Asked Questions
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