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1/5/2019 by 
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Can Health Care Insurance Premiums be Tax Deductible?

The short answer: yes, sometimes. It depends on the scenario, and there are always exceptions to the rule. This article provides a brief and basic guide to the tax deductibility of health care insurance premiums. Do consult with your insurance provider for more depth, however.  

Did you personally pay for the premiums?

If you have not personally paid for your own health care insurance premiums, they are not tax deductible. So when they are paid by the company that you work for, or by the government, those premiums aren’t tax deductible. However, if you pay for part of the premiums, you’re eligible for tax deductions on that one part. The part that your employer paid for, however, cannot be tax deductible.

Did you receive an advanced premium tax credit?

When a person buys individual or family health care insurance through one of the the ACA’s state or federal based health insurance exchanges, they might receive an advanced premium tax credit that would serve to lower the total cost of the health care insurance. In this case, the person would no longer be able to claim their subsidy as a tax deduction. On the other hand, if they did pay for some part of the premium themselves, they could be eligible for a tax deduction on that portion.  

Did you pay for your premiums with pre-tax money?

Pre-tax money is money that a person has already received benefits on. Therefore, they cannot get a benefit on that money again, and hence, any health insurance paid for with that money would not fall under the umbrella of deductible expenses. Now, it’s often the case that people pay for their premiums with money that comes from their income before it has been subjected to income tax calculation. In this case, the premiums have been paid for using money that is pre-tax, and therefore not eligible for a tax deduction. If you are confused as to whether the money you’re paying your premiums with is pre or after-tax, consult with the payroll or HR department in order to find out.  

Did you pay for your premiums with your own after-tax money?

It is possible for such premiums to be tax deductible. If your health care policy was bought directly from an insurance company, or from your state’s health insurance exchange, the money spent on the premiums can be tax deductible. It is important to note, however, that this deduction could have some limitations.

Are you self-employed?

A self-employed person, who is not covered by their spouse or partner’s company healthcare insurance, could write off their premiums as a tax deductible expense. However, such a person can only write off as much in premiums as they have earned.

Are Medicare premiums eligible for deduction?

Some premiums are. These include Part B, Part C, Part D and Medigap supplemental premiums. However, this is only in the case that the total amount is more than 7.5% of income.

 

 

 

 

 

 

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