Can you deduct medical insurance premiums on your tax return

There are tax benefits available to self-employed individuals who pay health insurance costs. Self-employed taxpayers can deduct 100% of their health insurance costs in computing their income taxes.

Let’s review the tax rules on health insurance premiums. Health insurance premiums paid by non-self-employed taxpayers are deductible as itemized medical expense deductions, but only to the extent your total medical expenses exceed 7.5% of your adjusted gross income (AGI). For tax years ending after 2018, medical expenses will be subject to a 10%-of-AGI floor, instead of the 7.5%-of-AGI floor.

Because of the “floor” that applies to the medical expense deduction, if total medical expenses don’t exceed 7.5% of AGI (or 10% after 2018), no itemized deduction is available.  Also, with the increased standard deduction there will be fewer taxpayers that can itemize so it more advantageous to deduct these premiums through the business if possible.

A self-employed taxpayer can deduct medical insurance premiums -as an “above the line” deduction, reducing taxable income for 100% of the health insurance costs for the taxpayer, spouse, and dependents.

The health insurance deduction for self-employed taxpayers only applies for any calendar month in which you aren’t otherwise eligible to participate in any other subsidized health plan.

Also, the deduction can’t exceed your earned income from the trade or business for which the health insurance plan was established.

These rules also apply to sole proprietors, partners in partnerships and more-than-2% shareholders of S corporations where the company pays for health insurance coverage for its owners, partners or shareholders.

The tax benefits of a self-employed individual’s health insurance costs can effectively reduce your cost of health insurance. You may wish to consider stepping up your coverage considering these savings. Contact us if you wish to discuss how these rules apply to your particular situation or if you have any questions.

This is another Question ForMy Account. If you have a question or need personal income tax services in Clearwater, Largo, Dunedin, Oldsmar, Lutz or Land O’ Lakes, contact FMA, C.P.A. and let us show you the way!

Did you incur health costs? They might be deductible!

Did you incur health costs? In some cases health costs are deductible. However, you have to meet several requirements when you want to declare your health costs in your tax return. On this page, we will explain which requirements you should fulfill to qualify for tax-deductible health costs.

When you want to declare your health costs in your annual income statement, you have to meet several requirements.

• First, the costs should not fall under the mandatory and/or voluntary deductible.
• The costs must have been incurred due to sickness or invalidity.
• Also, the costs must have been incurred in the year for which you are filing the annual income tax return.
• Another requirement is that the costs may not be covered. 
• Another point to take into account is that the costs are not deductible if the costs do fall under the basic insurance package, but you choose to go to a non-contracted care provider.

What amount is deductible?

1. Based on the information mentioned above, you can determine which health costs fulfill the requirements, and for which amount they initially are deductible.

2. Next, add a possible increase of the health costs to the determined amount. You can calculate this using the table mentioned below. With this feature, you may increase the deductible health costs, without actually incurring these costs. However, this is only allowed if you have an income below a certain threshold income (€35,375).

3. Reduce the amount determined under point 1 and 2 with the threshold. The threshold can be determined using the tables mentioned below.

If you did not have a fiscal partnership during the whole year, the table below applies to you.

We are happy to help you!

The TaxSavers is happy to help you get the most out of the deductible items with your annual tax return or provisional assessment. A provisional assessment ensures that you receive a monthly refund from the tax authorities.

Do you have questions regarding deductible gifts or other tax-related matters? Fill in our contact form or give us a call on +31 (0)20 – 2170120.

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