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?
In 2019 and 2020, 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 instance, say your AGI is $50,000 and your medical expenses are $6,000. 7.5% of your AGI is $3,750, so you can only deduct the $2,250 beyond that.
2. What medical expenses qualify?
In general, you can deduct many medically necessary out-of-pocket expenses, including preventive care, treatments, surgeries, prescription medications 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 1040 Schedule A. Generally you should keep receipts for three years or longer in case you are audited.
4. Are health insurance premiums tax deductible?
Maybe. If you pay them with after-tax dollars and your total medical expenses (including premiums) exceed 10 percent of your AGI, you can generally deduct them. Most group 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.
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 2019 are $12,200 for single filers and $24,400 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.