With hospital stays increasing in cost and premiums being tax-deductible in certain circumstances, health insurance coverage is increasingly crucial. Premiums are considered medical expenses and allow taxpayers to deduct them when itemizing deductions on their taxes. Furthermore, self-employed or employees of small businesses can claim them as fully deductible business expenses; the rules around doing this are complex but this article will examine when you can and cannot deduct health care premiums and how it factors into overall deduction eligibility.
Are Health Care Premiums Tax Deductible? A health care premium is considered an unreimbursed medical expense that may qualify for tax deduction. To take advantage of this tax benefit, itemize your deductions to qualify; its threshold can change each year.
To learn about what healthcare expenses you can and cannot deduct, consult IRS Publication 535: Medical and Dental Expenses or visit the IRS website.
Health care premiums may qualify as medical expenses if you’re self-employed, or paying them on behalf of yourself and family. However, if they’re covered through a cafeteria plan or similar benefit program that uses pre-tax dollars – including any premiums paid through an FSA provided by an employer – you cannot claim them as deductions.
Even though your health insurance premiums may be tax-deductible expenses, they may not all qualify as deductions in their entirety. Under the Affordable Care Act (ACA) in 2021 and 2023 respectively, only an amount exceeding 7.5% of adjusted gross income could be claimed as deduction. This threshold was later raised.
The IRS mandates that you maintain detailed records of all healthcare costs, such as health insurance premiums. You can use these records to document the amount of your medical expense deduction when filing income tax returns; and in case of audits, having such documentation will help safeguard your rights to this valuable deduction.
Health insurance premiums are one of the more overlooked tax deductions available to individuals and small businesses alike, yet their ability to claim as itemized deductions directly affects taxable income reported on tax returns; diligent record-keeping can make all the difference come tax time.
Your health insurance premiums and medical expenses that exceed 7.5% of your adjusted gross income can help maximize this valuable tax benefit. Reach out to us and find out more about how we can assist in claiming these expenses as part of your tax preparation strategy; our wide range of services is designed to maximize deduction eligibility while filing accurate returns.