Is Medical Insurance Tax Deductible – Overview
Is medical insurance tax deductible? – this is the most common question asked by individuals while filing their income tax returns. Many of them do not know whether their healthcare insurance premiums are tax deductible or not. If you are wondering about the same, this guide will help you.
Well, tax deductions of healthcare insurance policies are based on various factors. There is no specific answer to your as different people have different health insurance policies.
Factors That Affect Tax Deduction of Medical Insurance
Many factors could affect the tax deduction of your healthcare insurance premiums. Some health insurance policies allow you to go for the tax deduction and some do not.
- How do you get your coverage?
- How much insurance did you pay in the last financial year?
- How much money did you spend on medical services?
- Are you self-employed or government-employed?
- Your source of income? Etc.
Tax deductibles are different for self-employed people and others. Likewise, some other factors also affect it. Let’s decode this confusion to know whether my medical insurance is tax deductible!
To give you in-depth information about the relationship between medical insurance and tax deduction, here we have categorized two types of health insurance i.e. health insurance that is tax deductible and health insurance that are not tax deductible. Let’s collect some more information about both types.
Health Insurance Premiums That Are Tax Deductibles
Any expenses you pay out of your pocket for health-related policies and services and medical services are considered tax deductibles. If you pay your health insurance premiums from your pocket, these premiums are liable for a tax deduction.
You can claim a tax deduction for such expenses while filing income tax returns.
You can claim a tax deduction for such premiums for yourself, your spouse, and other dependents. If you have purchased Medical Insurance through COBRA, then it is also tax deductible.
If you are paying premiums for Plan B and Plan D, then it is tax deductible. If you are not enrolled in the government’s Medicare Program, then the premiums you pay out of your pockets for any other health insurance policies, are considered tax-deductible premiums.
Whether self-employed or government-employed, you can not deduct 100% of your medical or healthcare expenses. You can deduct 7.5% of your total adjusted gross income under the income tax law.
What Types of Health Insurance Premiums Are Not Tax Deductible?
As noted above, health insurance coverage is offered by many private entities to citizens who are not eligible for Medicare or Medicaid. Those who have enrolled for such policies need to understand the basics of health insurance premiums and tax deductions.
Not all health insurance premiums are tax deductibles. If the health insurance premiums that are paid by your employer before filing the taxes are not tax deductible since you didn’t pay for it.
Those enrolled in the government-backed Medicare program with Program A and paying premiums through Social Security are not liable for tax deductions as per the law.
If you are paying your premiums through a subsidy from the government or any other organization, then you can’t get a tax deduction for such premiums as these premiums are not paid from your pocket.
What Medical Expenses Are Tax Deductible?
Did you know some medical expenses are tax deductible under the federal income tax law? Many of you might not aware of the tax deduction on medical expenses directly. You can claim a tax deduction for the below-listed medical expenses besides health insurance premiums paid from your pocket.
- Dental insurance premiums
- Vision insurance premiums
- Payments for doctors, psychiatrists, psychologists, chiropractors, etc.
- Hospital care for inpatient
- If the person is in a nursing home or taking medical treatments at home.
- Treatments for drug or alcohol addiction.
- Weight loss programs under certified doctors.
- Prescribed drugs and insulins.
- Transportation to the hospital or any other healthcare provider’s clinics.
- Preventative dental care and other dental treatments
You can file for a tax deduction if you have paid any of the above medical or healthcare expenses out of your pocket even if you do not have a health insurance policy.
You can only claim a tax deduction if the total medical expenses exceed the qualifying limit i.e. 7.5% of your total adjusted gross income. You can’t claim a tax deduction if the medical expenses are paid by some organization or your employer.
This type of deduction is good for those with chronic illness as they have to spend money regularly for medicines, x-rays, check-ups, transportation, and many other expenses. It is not ideal for those who visit the hospital only once a year.
Now you know what types of medical expenses are tax deductible. But which are other medical expenses that are not tax deductibles? Let’s find out the answers.
Types of Medical Expenses That Are Not Tax Deductible
You can’t claim a tax deduction if you have paid for the following treatments or surgeries:
- Cost of cosmetic surgeries
- Over-the-counter drugs without doctor’s prescriptions
- Cost for general health improvement programs such as yoga, gym, aerobics, etc.
- Nicotine gum and other patches bought without doctor’s prescriptions
- Cost of buying expensive equipment without a doctor’s prescription
These are some medical expenses that a person is unable to claim for deduction under the income tax laws of the US government.
The Bottom Line:
Now, you know what types of health insurance policies, premiums, and medical expenses are liable for a tax deduction and what are not! The money you spend for anything from your pocket is liable for a tax deduction, but not 100% of them.
Some medical expenses are completely ignored here as you are spending money on unnecessary things without a doctor’s prescription.
You can even get tax deductions on supplemental health insurance and COBRA health insurance as per the law. If you own a health-savings account linked to health insurance premiums, you can claim a tax deduction for such savings accounts while filing your taxes.
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