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- Within the past decade, changes in the income tax code have given breaks to federal income tax filers or their dependents who have considerable medical expenses
- According to IRS tax Publication 502, tax filers can deduct all expenses for medical treatments that exceed the amount of 7.5 percent of their adjustable gross income (AGI)
- Healthcare plans, workers’ compensation, and malpractice insurance can be write-offs for small businesses
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Having comprehensive health insurance coverage for you and your family gives you an invaluable peace of min*]d. When offered by an employer, health insurance is considered part of the compensation package.
For decades, employers have offered lucrative health insurance plans to their employees to strengthen their labor force and attract a better quality staff.
A recent survey by the National Business Group on Health indicates that employers will seek to shift more of the increasing cost of health care onto the workforce.
In today’s economy, it is more important than ever to be aware of the health care deductions that could save you a substantial amount of money on your taxes.
Protect yourself and your family with the right health insurance policy! Enter your zip code above and start comparing affordable health insurance quotes now!
Are health insurance premiums tax deductible?
Within the past decade, changes in the income tax code have given breaks to federal income tax filers or their dependents who have considerable medical expenses.
Many kinds of medically necessary items or services can be listed on Schedule A of a 1040 return form and then deducted from your taxable income.
Medical expenses written off include premiums paid for health and long-term care insurance contracts as well as dental insurance.
Long-term health insurance policy premiums have different limitations on the deductible amount, depending on the age of the insured.
According to IRS tax Publication 502, tax filers can deduct all expenses for medical treatments that exceed the amount of 7.5 percent of their adjustable gross income (AGI).
In 2008, the median annual household income was just over $52,000 in America. Such a typical household could deduct any medical expenses including healthcare premiums that go beyond $3900.
Self Employed and Health Insurance Tax Deductions
Self-employed individuals are also allowed a health insurance deduction for healthcare expenses for themselves and their families.
However, the amount of the credit depends on the total self-employment income less the money diverted into retirement plans.
The amount deducted cannot be more than the income you earned from your business. Anyone qualified as chronically ill is also allowed to deduct expenses for treatment, therapy, rehabilitation, and a host of other medical expenses.
Healthcare plans, workers’ compensation, and malpractice insurance can be write-offs for small businesses. These tax credits are designed to boost small business owners’ bottom line.
Publication 535 on the IRS website will explain in meticulous detail every element of this tax provision. Life insurance or self-insurance contracts are not eligible to be counted as health care expenses.
Maintain Good Records for the IRS
Keeping your family’s medical records well organized is the key to lowering your taxes. As with any financial information, save all paperwork and file receipts and invoices so you can easily track your family’s medical expenses.
A small household with a few children can easily spend over 7.5 percent of their adjusted income on check-ups, prescriptions, urgent care, and medically necessary items.
What are qualified medical expenses?
The list of qualified medical expenses is very broad and inclusive. Review Publication 502 on the IRS web site for more ideas on what to include on your return as a medical expense.
Careful record keeping is crucial to saving money on income tax and getting bigger tax return. Only expenses paid by the patient are eligible for the credit.
Travel expenses to and from a doctor can be deducted with an allowance for fuel and a formula for calculating mileage. Overnight expenses can be included if seeking medical treatment from a specialist takes you far away from home.
Hospital lodging and meals are fully deductible, while $50 for each person towards a hotel room is permitted. You may claim dental work, wheelchair ramps, and guide dogs.
For example, breast pumps are deductible, but not maternity clothes. You cannot claim health club memberships, hair transplants, or payments into a health savings account.
All medical care must include a visit or treatment from a physician in a licensed hospital or other medical care facility to qualify. Adding these expenses with premiums payments for health insurance can make a difference on your tax return.
What about health savings accounts?
Payments into health savings accounts (HSA’s) are not deductible, as those dollars are pre-tax deposits made directly by you or your employer. Funds diverted into an HSA will protect part of your income from taxation.
The IRS does offer a health coverage tax credit (HCTC) which can pay 65 percent of qualified health insurance premiums, mainly for retired persons.
Unless your health insurance premiums are greater than 7.5 percent of your adjusted income, you will need to declare other medical expenses in order to take a substantial deduction.
Develop a tax strategy for taking the maximum amount of health care credits. Monthly or annual health care plan payments can be listed on Schedule A, form 1040, along with other medical expenses.
There are a lot medical expenses can often result in tax savings but as with any tax or legal question it’s important to consult a tax professional about current IRS laws, especially if you have a lot of healthcare expenses.
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[su_spoiler title=”References:” icon=”caret-square” style=”fancy” open=”yes”]
- https://en.wikipedia.org/wiki/Health_savings_account
- http://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/UnderstandingOver-the-CounterMedicines/
- https://www.irs.gov/affordable-care-act
- https://www.treasury.gov/resource-center/faqs/Taxes/Pages/Health-Savings-Accounts.aspx
- https://en.wikipedia.org/wiki/Medical_savings_account_(United_States)
- http://www.nolo.com/legal-encyclopedia/types-of-medical-expense-accounts-29522.html
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