The Truth About Deducting Health Care Premiums and Medical Expenses During Tax Time

medical costs

Health insurance is something we all need, and it’s no longer something we have a choice to have. Whether we can afford it or not – and most of us no longer find it affordable thanks to the affordable care act – we have to have it. The federal government has decided that they can interfere with our healthcare decisions and that they can fine us for not being able to afford to pay for health insurance that’s no longer affordable to the upper middle class. But that’s beside the point; the point is that you can either pay a hefty fine or you can pay for hefty health insurance premiums. Like it or not, you’re left with little choice. The good news, though, is that your premiums are often tax deductible, so you’re going to get a bit of a tax break in paying for health insurance throughout the year.

Who can deduct health insurance costs?

There is a rule that we must all follow when it comes to deducting health insurance premiums. For one, we have to itemize deductions. Secondly, we can only deduct the expenses that exceed 10% of our adjusted gross income (unless you are 65 or older and then you can deduct anything that exceeds 7.5% of your AGI). Basically, if you make $250,00 per year as your AGI and you have twins that spend a month in the NICU after they are born and your medical bills are $50,000, you can deduct $25,000 of that. If your expenses are $30,000, you can deduct $5,000 of that.

Who can deduct health insurance premiums?

If your employer pays your health insurance, you cannot deduct it. If you pay it but your employer takes it out of your paycheck before taxes are taken out, you cannot deduct it. If you are like me and you are self-employed and you pay out of pocket on money that is taxable, you can deduct it all.

What can I deduct?

Most anything you pay for that has a medically related expense is deductible. However, you cannot deduct items such as cosmetic surgery unless they are medically necessary, hair transplants or even medical marijuana. That one is a problem for some people. If you have a cancer scare and you have breast implants as part of your reconstructive surgery, that is considered deductible; the same goes for any sort of reconstructive surgery that is health-related or necessary due to an accident.

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