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FAQs for health insurance tax deductions

Detailed medical record-keeping can help you determine if you have potential tax-saving expenses.

Couple seeking advice on health care and tax deductions.

Taxes and health insurance on their own are complex. Taken together in order to figure out questions such as “Are health insurance premiums tax deductible?” and the complexity multiplies. Here are six considerations about taxes and health insurance to help you keep the records you need to file your return every year.

1. Can I claim medical expenses?

Based on the 2020 tax rules, the IRS, “allows taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross income (AGI)”. For example, say your AGI is $50,000 and your medical expenses are $6,000. Since 7.5% of your AGI is $3,750, you can deduct $2,250.

2. What medical expenses qualify?

In general, you can deduct many medically necessary out-of-pocket expenses, including preventive care, treatments, surgeries, prescription medications, dental, vison and medical supplies. (The IRS provides an exhaustive list.) You can even deduct transportation costs to and from medical care.

3. How do I claim medical deductions?

You must itemize your medical deductions on the Form Schedule A (Form 1040 or 1040-SR). Generally you should keep receipts for three years or longer in case you are audited.

4. Is health insurance tax deductible?

Possibly, if you pay health insurance premiums with after-tax dollars and your total medical expenses (including premiums) exceed 7.5% of your AGI, you can generally deduct them. Most group health insurance plans are paid using pre-tax dollars, but check with your employer to be sure. Medicare A (if voluntarily enrolled and not covered under Social Security), Medicare B and Medicare D premiums are all generally tax deductible. If certain criteria is met, self-employed individuals are sometimes able to deduct their health insurance premiums, even if their expenses do not surpass the 7.5% threshold.

5. What doesn’t qualify as a tax deduction?

You cannot deduct expenses paid with a health savings account (HSA) or a flexible spending account (FSA). Cosmetic surgeries, over-the-counter drugs, health club dues and personal hygiene items are typically not tax deductible. Reference the IRS Publication 502 for a complete list.

6. Should I just take a standard deduction instead?

The standard deductions for 2020 are $12,400 for single filers and $24,800 for married, filing jointly. You should consider itemizing your deductions if your allowable itemized deductions are greater than your standard deduction or if you must itemize deductions because you can't use the standard deduction.

Visit https://www.irs.gov/taxtopics/tc501 and consult a tax professional to discuss your individual tax needs.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm nor its agents provide tax or legal advice.



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