Health insurance can be costly, and some Americans look to reduce their monthly medical expenses by claiming tax deduction on their premiums. Many of us know healthcare can be expensive, so tax deductions can help you save during tax time. Here’s what you need to know about claiming tax deductions for your health insurance.
Are Health Insurance Premiums Tax-Deductible?
Health insurance premiums are not always deductible. Depending on your income and other factors, your health insurance premiums may be fully or partially deductible. In some cases, you must meet a certain requirement if you want to claim a tax deduction for health care costs.
When Health Insurance is Not Tax-Deductible
First of all, if you’re not paying for health insurance for yourself or a dependent, you can’t deduct those premiums. In addition, you can’t claim your health insurance premiums as a tax deduction if any one of the following is true:
- You’re a tax-exempt organization.
- You’re a governmental employee.
- You’re a member of a health care sharing ministry.
- You didn’t pay the premiums yourself, such as when your employer pays for all or part of them.
- You or your spouse is not a US citizen, and you have not received a waiver.
- You’re not filing a tax return because, for example, you have too little income.
If you can’t claim a tax deduction for health care costs because you fall into any of these categories, you may be able to claim the health insurance premium tax credit.
Conditions for Claiming a Tax Deduction for Health Insurance Premiums
There are certain conditions you must meet if you want to claim a tax deduction for health insurance premiums.
The Affordable Care Act requires that you must have a minimum level of health coverage or pay a tax penalty for the months you, your spouse, or your tax dependents don’t have coverage. This requirement is known as the shared responsibility payment.
If you have a marketplace health insurance plan, you’re complying with this requirement. If you have coverage through a spouse’s employer, you’re also complying. However, if you’re not your spouse’s tax dependent, you’re not complying. If you don’t have coverage, you may choose to pay the shared responsibility payment (effectively increasing what you pay for insurance), or you can claim a tax deduction.
If you want to claim a tax deduction for your health insurance, you must meet all of the following requirements:
- You itemize deductions on your tax return, not take the standard deduction.
- Your insurance premiums were not paid with pre-tax dollars, such as through a flexible spending account or health savings account.
- You have coverage for the entire year. If you don’t have coverage for the entire year, you can deduct only the premiums you paid for the months you were covered.
- Your employer did not pay any part of your insurance premiums.
- Your health plan isn’t a “health flexible spending arrangement” or FSAs, “health reimbursement arrangement,” HRAs, or health savings account. These plans must be funded with pre-tax dollars.
- You do not have coverage under another plan that’s not on this list. If you’re eligible for Medicare, you’re also eligible for a tax deduction.
- You do not qualify for other health coverage tax deductions. If you’re under 65, you can’t claim a tax deduction if your employer pays for a portion of your health insurance. If you’re over 65, you can’t claim a deduction if you have other health coverage.
Conclusion
Tax season can be stressful, but you don’t have to stress out over health insurance premiums. As long as you qualify, you may be able to claim a tax deduction for health care costs on your federal tax return. If you are unsure, speak with your tax professional to determine your eligibility.
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