Is Health Insurance Tax Deductible? If you’re self-employed, your health insurance premiums are tax deductible. That means if you don’t have access to employer coverage or can’t afford COBRA, you should be able to find affordable health insurance that covers the basics. If your business provides coverage for employees, they may be eligible for tax deductions as well.
Is Health Insurance Tax Deductible
Health insurance tax deductions for the self-employed or employees of small businesses.
If you’re self-employed, you can deduct the cost of your health insurance premiums on your tax return and even contribute to a Health Savings Account (HSA). You may also be able to deduct out-of-pocket medical expenses, including dental care and vision services, that exceed 10% of your adjusted gross income.
If you work for a small business with fewer than 25 employees and earn $50,000 or less annually in combined wages and self-employment income, the Small Business Health Care Tax Credit may apply to help offset part of the health care costs incurred by yourself or your family members through an HRA or HSA.
If you’re self-employed, you may also be able to deduct up to 50% of the cost of health insurance premiums paid for yourself, your spouse and dependents. The IRS provides more information on this deduction here.
Health insurance tax deductions for employees of larger companies.
Let’s say you’re an employee at a large company and have healthy lifestyle. If that’s the case, then you can deduct your health insurance premiums for yourself, your spouse and your dependents. The IRS will allow you to deduct up to 50% of the cost of your health insurance premiums paid during the year.
Here are some important facts about this deduction:
- Only employees who pay for their own plans can take this deduction; it doesn’t apply to businesses that self-insure. In other words, if the employer pays the entire cost of its workers’ health care coverage (including family members), then there won’t be any tax deductions available for those employees on their personal income taxes.
- Employees must itemize their deductions in order to claim this write-off (and most people don’t). For example, if two parents are married with three children under age 19 living at home and they file jointly as head of household (HOH), they need at least $12,700 in unreimbursed medical expenses before they get any relief from paying taxes on them through itemized deductions such as HSAs or MSA withdrawals
- So keep in mind that even though HOH status may sound appealing because otherwise those same individuals would have had no choice but instead file jointly under married filing separately status instead — it might not always mean lower taxes than what could have resulted from MFJ filing after all!
Does the new tax bill change anything?
The new tax bill does not change the tax deduction for health insurance. It remains at $10,000.
The new tax bill does change the tax deduction for medical expenses. Beginning in 2019, you can only deduct medical expenses that exceed 10% of your adjusted gross income (AGI) or 7.5% of your AGI if you or your spouse are 65 or older. For example: If your family’s AGI is $100,000 and your total allowable medical expenses for 2017 were $7,500 (including premiums), then none of those expenses would be deductible under these rules because they didn’t exceed 7.5%.
In 2018 however, if those same expenses were now over $8,750 ($100k x 10%) they’d be deductible because they do exceed 7.5%.
The new tax bill doesn’t affect the tax deduction for prescription drugs and insulin supplies under Medicare Part D plans—you can still save up to 50% on out-of-pocket costs there!
Yes, you can deduct some or all of your health insurance costs in taxes.
You may be able to deduct the cost of your health insurance if you itemize deductions on your federal income tax return. The IRS allows taxpayers to deduct medical expenses from their taxes if they exceed 10% of their adjusted gross income (AGI). If you or your spouse have reached age 65, you can also have an additional 7.5% added, bringing the total deduction up to 17.5% for qualifying medical expenses.
Most people who are eligible for an above-the-line deduction will file Form 1040 rather than Form 1040A or Form 1040EZ; however, those who don’t qualify under any other category should check whether they can take advantage of this deduction as well before opting out of filing a formal tax return altogether.
The lesson here: HOH status can be a real advantage for some families, but it’s not always the best choice.
if you’re self-employed, your health insurance premiums are tax deductible
If you have health insurance, the cost of your premiums is tax deductible. According to the IRS, if you’re self-employed and pay for your own insurance plans, those costs are tax deductible. If you’re an employee of a small business (or even just one person working for yourself) and pay for your own health insurance plan, that’s also considered a tax deduction.
What the new tax bill does do is eliminate the medical deduction for all other out-of-pocket expenses. So if you have a co-pay plan or health savings account (HSA), they won’t be deductible anymoreIf you or your spouse have reached age 65, you can also have an additional 7.5% added, bringing the total deduction up to 17.5% for qualifying medical expenses.
Most people who are eligible for an above-the-line deduction will file Form 1040 rather than Form 1040A or Form 1040EZ; however, those who don’t qualify under any other category should check whether they can take advantage of this deduction as well before opting out of filing a formal tax return altogetherIf you have a health insurance policy through your employer, the amount that your employer pays toward those premiums may be deductible as well. This is called an “employer contribution.”.
To qualify for this deduction, you must have a job that offers health insurance benefits. The amount of the deduction is limited to the lesser of either the actual premium paid or $3,000 for an individual or $6,000 for a family plan. If your employer contributes more than this to your premiums, then only those amounts count toward the limit on how much can be deducted from your income
So, it looks like health insurance premiums are tax deductible, if you meet the requirements. The good news is that even if you don’t meet all the requirements, there’s still hope for getting your taxes back on this expense. If you have questions about whether or not your health insurance premiums are tax deductible and what other expenses may be deductible too, give us a call or send us an email today!c