Considering the cost of health care, it does pay to ask: is health insurance tax deductible? The good news is you can use it to lower your income tax. You can also save more money by deducting other specific medical expenses. However, there are rules.
In this article:
- Do Health Insurance Premiums Count as Deductible Medical Expenses?
- How Much Can You Claim as a Deductible?
- Can You Deduct Health Insurance Premiums if You Are Self-Employed?
- Is Health Insurance Tax Deductible If Coverage Is for Family Members?
- Are Medicare Premiums Deductible?
- Are There Medical Expenses You Can Deduct?
- How Does the Standard Deduction Affect Health Insurance Deductions?
Is Health Insurance Tax Deductible? | Get the Answers Here
Do Health Insurance Premiums Count as Deductible Medical Expenses?
Let’s tackle the important question: is health insurance tax deductible, and can you treat its premium as a medical expense? As long as you pay your premium with “after-tax dollars,” you may deduct the cost on your tax return.
In other words, you cannot declare those paid by your employer, including a reimbursement, as a deductible. If you have copayments for medications or treatments, you can deduct your share directly.
The types of health insurance premiums that can qualify include:
- Health insurance
- Dental insurance
- Vision/eye care insurance
- Long-term care insurance
You must itemize these deductions on your income tax return to claim the expense. These itemized deductions should be on Schedule A of the IRS Form 1040.
How Much Can You Claim as a Deductible?
To know your deductible, you should calculate your adjusted gross income (AGI). It appears on line 37 of Form 1040. It represents your gross income during the tax year less the adjustments and deductions.
The Tax Cuts and Jobs Act (TCJA) enacted in December 2017 reduced the threshold for 2017 and 2018. You may claim any health insurance premiums and other medical expenses you paid during those tax years above 7.5% of your AGI.
For instance, your AGI is $50,000 by 2018. The 7.5% of it equals to $3,750. If you paid $10,000 in health insurance premiums, you can deduct the difference: $10,000 – $3,750 or $6,250. If you paid less than $3,750, those premiums don’t meet the threshold. They are, therefore, not tax-deductible.
Can You Deduct Health Insurance Premiums if You Are Self-Employed?
Another question: is health insurance tax deductible if you use self-employment income? Those who are working on their own usually have a different way of calculating taxes and deductions. In this case, the self-employed health insurance deduction is not an itemized deduction.
If you are a freelancer or contractor, you should file a Schedule C along with your 1040 form. It directs you to include health insurance premiums. This amount then reduces your taxable income and, thus, your income tax due.
Is Health Insurance Tax Deductible If Coverage Is for Family Members?
If you paid health insurance premiums for your spouse, yourself, and your dependents, you can deduct the amount that exceeds the 7.5% threshold of your AGI when you file taxes.
Dependents can include any family member for whom you paid health insurance premiums or medical costs. You should also declare them as dependents on your tax return.
You may also claim deductions for premiums paid for people who are not your dependents as long as you are related to them. Some examples include:
- A child you can’t claim as a dependent due to a divorce but who benefit from your payment of health insurance and medical costs.
- A person you care for and support who earned money and filed their own tax return (for example a child or parent who works part-time).
The Internal Revenue Service (IRS) provides some detailed guidance for people who pay health insurance premiums for family members who work on their own but don’t make enough to cover the cost of medical care.
For example, you have an older relative who earns a modest amount of money from a part-time job. You can’t claim this person as a dependent since they will file their own tax return. However, you can deduct health insurance premiums you pay on their behalf.
Are Medicare Premiums Deductible?
Medicare premiums follow the same general tax deductibility rules as Affordable Care Act (ACA) or other health insurance premiums. You may deduct any premiums you have paid for Medicare Part B, deductible or coinsurance costs for Medicare Part A, and Medicare Part D prescription drug premiums.
If you have Medicare supplemental insurance, you can maximize the premiums as well. However, they still need to exceed 7.5% of AGI to be deductible.
Are There Medical Expenses You Can Deduct?
Many different health care expenses are deductible. These include:
- Eye exams and prescription eyewear
- Dental care and appliances, including false teeth, treatment, and exams
- Meals and lodging in a nursing home or hospice care
- Substance abuse treatment
- Weight loss programs and health club dues to treat a specific disease
- Food required to treat a disease or as part of a medically advised diet
- Trips to medical conferences for specific medical conditions
- Costs of disease prevention and complementary and alternative medicine (CAM), such as acupuncture
On the other hand, you cannot claim deductions for:
- Vacation costs
- Vitamins, minerals, and protein supplements
- Normal gym fees or exercise classes not prescribed or advised by a physician
How Does the Standard Deduction Affect Health Insurance Deductions?
For the 2018 tax year, the standard tax deductions (or the flat amount you can automatically claim against your federal taxable income) have increased:
- Singles: from $6,000 to $12,000
- Married Filing Jointly: from $12,700 to $24,000
- Head of Household: from $9,350 to $18,000
The tax rule says you can claim itemized deductions if they exceed the standard ones. Thus, even if your health insurance premiums are above the 7.5% AGI threshold, you may still not benefit from it.
Is health insurance tax deductible? The answer is yes, so it does pay to get yourself covered. Note, though, there are rules to follow. Moreover, with the increase in the standard tax deduction, you need to weigh whether itemizing it still makes sense.
Have you claimed health insurance as a tax deductible? Share your experience in the comments section below.