Can i deduct health insurance premiums

Even if you're self-employed, if you, your spouse, or your dependents are covered by an employer's group health insurance plan either your own, from a separate job, or your spouse's or parent's plan , the premiums you pay for that coverage are probably not something you can deduct on your tax return. That's because they're most likely already being paid with pre-tax dollars since employer-sponsored health insurance is tax-deductible for both employers and employees.

And the IRS clarifies in Publication that even if you buy your own health insurance and are self-employed, you can't deduct the premiums if you're eligible to have coverage that's subsidized by an employer, including your own or your spouse's. That's true even if you declined that coverage and bought your own plan instead. Your HSA may be established through your employer, or it may be something that you set up on your own, as you can have an HDHP offered by an employer or purchased in the individual market.

Contributions to your HSA can be made by you or by your employer, but only the portion you contribute yourself is tax-deductible.

If you fund your HSA through payroll deduction, the contributions will be made on a pre-tax basis, and that will be reflected in the W-2 you receive i. But if you fund your own HSA, you'll keep track of the contributions you make during the year and deduct the total on your tax return your HSA administrator will also keep track of the amount and will report it to you and the IRS using Form SA.

The premiums that you pay for your HDHP can also be deducted, just like any other health insurance premium, if you're self-employed. Or, as described in the next section, as part of your overall medical expenses if you itemize your deductions and your medical expenses are high enough to qualify for the deduction. If you obtain your HDHP via your employer, the premiums are most likely already being paid on a pre-tax basis.

In that case, just as with any other type of health insurance, you can't deduct the premiums on your tax return, since the money you used to pay them wasn't taxed in the first place. So if you're enrolled in an HDHP through your employer and you're making contributions to your HSA via payroll deduction which is how this works for most people , you likely won't take deductions for either one on your tax return, since the premiums and contributions are probably subtracted from your paycheck on a pre-tax basis.

Even if you are not self-employed, the Internal Revenue Service IRS allows you to count medical and dental insurance premiums and with some limitations, long-term care insurance premiums as part of the 7. But Congress reduced the threshold back to 7. A long list of health-related expenses can be included in your total medical expenses, including prescription medications and optional surgical procedures, like laser eye surgery to correct vision.

The IRS has a list on its website. Keep track of the out-of-pocket expenses you incur during the year—including health insurance premiums if you're buying your own plan but are not self-employed and thus cannot use the self-employment health insurance deduction. If your total costs exceed 7. But in order to deduct medical expenses, you have to itemize your deductions. This is in contrast to the two scenarios described above—the self-employed health insurance premium deduction and the Health Savings Account deduction—both of which can be utilized regardless of whether you itemize deductions.

The Tax Cuts and Jobs Act, enacted in late , substantially increased the standard deduction, making the standard deduction the better choice for most tax filers. In order to benefit from itemizing your deductions, you'll need a lot of expenses that can be itemized. Depending on your medical costs and other itemizable expenses, you may come out ahead this way.

And you should certainly keep track of your medical expenses throughout the year so that you'll be able to sort it all out at tax time. But keep in mind that with the new standard deduction amounts, it's much less likely now that you'll end up itemizing your deductions, including medical expenses.

This is just an overview of how the IRS treats health insurance premiums. If you have questions about your specific situation, but sure to speak with a tax advisor. With just a little paperwork on your part, an employee can contribute to the cost of health insurance on a pre-tax basis.

Employers should also be aware that the Affordable Care Act offers small businesses healthcare tax credits to help offset the cost of insurance. The small business healthcare tax credits have been available since the tax year. Beyond this general rule, things get a bit more complicated. Below we offer detailed information on the tax implications of offering a group plan for your business. When discussing taxability of health insurance, there are a few main issues:.

Also, the taxability of health insurance can be affected by how you set up the health plan. In addition, because taxable income is reduced, related employer-paid payroll taxes are also reduced. Obviously, tax issues can get complicated, so you should consult with your accountant or attorney about your specific circumstances. If you find yourself getting confused, just remember that most tax-related questions boil down to one or more of the main issues listed above.

These are the main questions employers and employees find themselves asking. We will answer them below. Keep in mind that the answers to these issues may differ depending on the legal structure of the business.

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