Are Health Insurance Premiums A Federal Tax Deduction?

Lots of us complain about the high cost of income taxes and the high cost of medical insurance. We may be able to reduce the real costs of both of these things if we take the right deductions.

Let us look at some ways to deduct your insurance rates from your income taxes!

Many Americans have a work based medical plan? If so, you may still be able to deduct some of your costs. If you pay for your part of the premium through an employer pretax plan, you are already getting a tax break. Your contribution will reduce your income. You will have less income to get taxed on. You also get your income reduced because of other medical expenses you pay through this type of pretax plan. These could be medical, dental, or even vision related. Even if your job does not have a pretax plan for medical expenses, you can deduct any medical expenses will total more than 7.5 percent of your adjusted gross income. You can also take advantage of tax deductions for qualified long term care insurance (LTCi and dental insurance. Other medical expenses, that you have to pay out of your pocket, also go into that total. It is important to keep track of your medical expenses every year so you do not miss out on this tax break!

Let us consider an example where an employer pays half of the premium. Your family premiums equal $1,200 a month so you pay $600 of that through payroll deduction every month. That equals $7,200 a year. Your employer paid the other half. Let us say your adjusted gross income (AGI) was $50,000. You can deduct any amount over $3,750, which would be 7.5 percent of $50,000. This should reduce your final tax bill.

What about people who do not get a group medical plan? Many people work for smaller companies that do not offer group medical benefits. Others are self employed business owners, contract workers, or professionals. If you have to buy individual health insurance, you can deduct the premiums as an expense. This medical insurance can cover you, your spouse, and your children. This reduces the real cost of the premiums because you will get some tax breaks.

While you can deduct health, dental, and qualified long term care insurance, these rules do not apply to disability insurance or the medical coverage that comes with auto insurance policies.

Hopefully you can use these deductions to make your tax bill lower, and your health insurance more affordable!

If you are still struggling with your premiums, you may want to run some online insurance quotes so you can find cheaper rates.


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FInd out more about who can deduct health insurance premiums to reduce the bill or get a larger refund. If you want to save even more money, take a moment to compare online insurance quotes with our fast and free forms!