Can Health Insurance Payments Be Deducted from Your Taxes?
Brookline, NH Resident Looks for Answers
For those who are self-employed, health insurance premiums paid throughout the year can be deducted on their taxes. Even if you do not item deductions on Schedule A, these health insurance premiums can still be deducted on your tax return. For W-2 employees you can deduct out-of-pocket medical expenses and health insurance premiums only if you take the itemized deduction on your tax return. Employees looking to take this deduction can only do so if these premiums and other medical expenses when the amount exceeds 7.5% of your Adjusted Gross Income.
A Brookline resident was frustrated with the amount of healthcare premiums that he was paying for his family. Hoping for some relief from this expense, he was looking for ways to save on his taxes.
Employer Health Insurance Seldom Qualifies as a Deduction
Most W-2 employees do not pay enough for their employer-sponsored health insurance to exceed the required 7.5% of their adjusted gross income. The premium that is taken out of your paycheck is already tax-free. Other medical expenses can be used to total the 7.5% needed for this deduction. These include long-term care insurance, dental, vision, and mental health services. If the total of these qualifying expenses and the portion of your health-care premium exceed 7.5% of your adjusted gross income you may be able to deduct these expenses from your taxes.
Self Employed Individuals Can Deduct Health Insurance, Reducing Taxable Income
Those who are self-employed can deduct health insurance premiums, including qualifying medical expenses, from their tax bill. To be eligible for this deduction, you must not have health insurance from any employer for which you are a W-2 employee, and you must have some business income. This tax deduction will reduce your adjusted gross income, bringing down the amount that will be taxed at the end of the year. This can save money for those who are self-employed, offering significant tax savings.
The Brookline resident was part of an employer sponsored insurance, with premiums and medical expenses for the year not exceeding 7.5% of adjusted gross income. Unfortunately, because of this he was not able to qualify for a tax deduction for his family’s health insurance.