Health insurance is something we all need. The premiums we pay for our insurance from work may be tax-free, to begin with. Payroll deduction plans use money drawn out before taxes are taken out. If this is the case, you can’t claim a deduction at the end of the year. When your healthcare costs reach a certain amount, however, you may be able to claim a deduction. If you are self-employed, certain criteria will allow you to write off your healthcare premiums. This article discusses how you can deduct your health insurance premiums from your taxes.
Understanding Health Insurance Premiums
The premiums you pay to keep your health insurance in good standing may be considered a maintenance fee of sorts. Premiums will continue to rise along with the cost of healthcare. In addition to monthly premiums, you will also have to pay co-pays, deductibles, and other expenses like prescriptions. The Affordable Care Act gives you the option to access tax credits on many health insurance plans, making your premiums more affordable.
Deductions for Qualified Unreimbursed Healthcare Expenses
If you buy your health insurance on your own through an insurance agency and use money left over after taxes have been taken out, you may be able to apply some of those when you file your taxes at the end of the year. If you have unreimbursed healthcare expenses that total above 7.5% of your AGI, or adjusted gross income, you will be allowed to deduct that amount from your taxes. This includes both premiums and out-of-pocket expenses.
Medical Expense Deductions for the Self-Employed
The 7.5% rule does not apply to self-employed individuals. All of your premiums can be used as a deduction in this situation. This will be overridden if you have opportunities to get health insurance through other companies or another job, including being offered insurance through a spouse’s plan. As a business owner, you are not allowed to deduct more than the income amount earned throughout the year.
Other Ways to Lower Your Tax Bill
If, for any reason, you are not allowed to use your health insurance premiums as deductions, you do have other options that will allow you to lower your tax debt. Increasing your deductible is one way to keep your tax bill low. You can also prefer to consider opening a Health Savings Account. Money put into an HSA is set aside to pay for healthcare expenditures that you have to pay out of your own pocket.
What Medical Expenses Are Tax Deductible?
There are many expenditures that are tax-deductible. They include any money paid for doctor/dental visits, inpatient hospital care, weight-loss programs, acupuncture treatment, and other expenses. The IRS has a full list of medical expenses for you to consider.
Filing taxes at the end of the year can be overwhelming. It’s up to you to understand what type of expenses you can claim as deductions and what you can’t. Call our insurance professionals at J. Archer Insurance Group today to find out everything you need to know about your health insurance costs and what impact they will have on your taxes at the end of the year.