Are my health insurance premiums tax-deductible?
When it comes to paying for health insurance, it’s important to understand your health insurance premiums, including how much you’re paying each month and their impact on your overall health care expenses.
Before we get into health insurance premiums that are tax-deductible, here’s what you need to know:
>What is a health insurance premium?
>How can I reduce my health insurance premiums?
What is a health insurance premium?
A health insurance premium is a fee paid – typically monthly – by a policyholder to an insurance company or health plan to provide health coverage.
In addition to the premium, you may have to pay out-of-pocket costs—deductibles, copays, and coinsurance—when you seek medical care.
While your health insurance premium is an important component of cost, remember to think about other costs related to your health insurance. A plan with lower premiums may not be best for you if the other cost components are out of financial reach.
Consider these other costs:
Coinsurance. This is the percentage of costs paid after you’ve paid your deductible. For example 80/20 coinsurance requires that you pay 20% of your post-deductible costs while the insurer pays the remaining 80%.
Copayments. This is a fee to access medical care. It’s often called a copay and may be applied to an office visit or prescriptions.
Deductible. A deductible is what you pay for health care services before your insurer starts to pay. Generally, the more you pay for a premium, the less you’ll pay for deductibles.
How can I reduce my health insurance premium?
Consider health insurance subsidies. People who access health care coverage through the Marketplace and earn below certain income levels may be eligible for health insurance subsidies.
Research high-deductible health plans. When selecting health insurance plans, consider a high-deductible health plan, which often carries lower premiums. Note: These plans aren’t right for everyone. The trade-off is that they carry a higher deductible when health care services are accessed.
I will help you select the best plan for you and your budget.
Health Insurance Premiums That are Tax-deductible
For the 2021 tax year, you’re allowed to deduct any qualified unreimbursed healthcare expenses you paid for yourself, your spouse, or your dependents—but only if they exceed 7.5% of your adjusted gross income (AGI).
Here’s a look at health insurance premiums that are tax-deductible:
- Any health insurance premiums you pay out of pocket for policies covering medical and dental care are tax-deductible. (Medical care policies cover treatment including hospitalization, surgery, and X-rays; prescription drugs and insulin; dental care; lost or damaged contact lenses; and long-term care, with some limitations.)
- Premiums for insurance purchased through COBRA are deductible, as are Medicare premiums for Part B and D. If you are not enrolled in Medicare under Social Security and are not a former government employee who paid Medicare tax, premiums paid for Medicare A are also tax-deductible.
- When you purchase health insurance through the Health Insurance Marketplace, any premiums you pay out of pocket are tax-deductible.
- The 7.5%-of-AGI rule does not apply to self-employed persons. You can claim up to 100% of what you spent on premiums if you’re self-employed, but the deduction is limited to your net self-employment income.
Talk to a Licensed Independent Insurance Agent
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