Orlando Harmon
When it comes to tax season, medical expenses can provide some relief. While insurance premiums and medical expenses may be tax-deductible, there are specific criteria and rules to be aware of. For example, if you have insurance through an employer-sponsored plan, you can't deduct your monthly premiums, but you can deduct out-of-pocket premiums, as long as you don't use an HSA to cover those costs and you itemize your deductions. Additionally, certain medical costs, such as acupuncture, addiction treatment, chiropractic services, and health insurance premiums, may be deductible. It's important to understand which expenses qualify and how to properly deduct them to maximize your tax benefits.
| Characteristics | Values |
|---|---|
| Insurance premiums counted as medical expenses for taxes | Self-employed health insurance premiums, health insurance premiums paid through the Health Insurance Marketplace, COBRA health insurance premiums, and certain out-of-pocket premiums for employer-sponsored plans |
| Insurance premiums not counted as medical expenses for taxes | Premiums paid by an employer-sponsored plan, premiums paid with pre-tax salary contributions, premiums for policies that provide a guaranteed weekly amount during hospitalization or injury, and premiums paid through a health savings account (HSA) or flexible spending account (FSA) |
| Other medical expenses that may be deductible | Acupuncture, addiction treatment, braille publications, chiropractic services, contact lenses, diet food, exercise programs, prescription medications, glasses, hearing aids, travel expenses for medical care, meals purchased at a medical facility, weight-loss programs prescribed by a doctor |
| Conditions for deducting medical expenses | Medical expenses must exceed 7.5% of adjusted gross income (AGI), unreimbursed and paid out-of-pocket, not paid through an HSA or FSA, and itemized on Schedule A (Form 1040) |
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What You'll Learn
Self-employed health insurance deduction
If you are self-employed, you may be eligible to deduct premiums that you pay for medical, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. This is known as the self-employed health insurance deduction. This health insurance write-off is entered on Part II of Schedule 1 as an adjustment to income and is then transferred to page 1 of Form 1040. This means that you benefit whether or not you itemize your deductions.
To be eligible for the self-employed health insurance deduction, you must meet certain Internal Revenue Service (IRS) criteria. Firstly, you must have a qualifying insurance plan. Eligible health insurance includes medical insurance, qualifying long-term care coverage, and all Medicare premiums (Parts A, B, C, and D). Secondly, you must be an eligible self-employed individual. You can include a health insurance premium paid for yourself, your spouse, dependents, and any non-dependent child under the age of 27 at the end of the year. You are also eligible if you are a general partner, a limited partner receiving guaranteed payments, or a shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2.
It is important to note that you cannot claim the self-employed health insurance deduction if you have access to participate in an employer-sponsored subsidized health insurance plan. This applies if either you or your spouse has access to such a plan through their employer. This rule is applied on a month-to-month basis, so you would only be disqualified from claiming the deduction for the months when you had employer plan coverage.
In addition, if your self-employment activity is a sole proprietorship that generated a tax loss for the year, you are not allowed to claim the deduction because the business did not generate any positive earned income. However, if you are a business partner or LLC member who is treated as a partner for tax purposes, you can deduct the health insurance premiums you pay directly. If the partnership or LLC pays the premiums, you can still claim the deduction for premiums paid for your coverage by following special rules.
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Medical and dental expenses
The following are some of the expenses that qualify for deduction:
- Unreimbursed expenses for preventative care, treatment, surgeries, and dental and vision care
- Unreimbursed expenses for visits to psychologists and psychiatrists
- Unreimbursed payments for prescription medications and appliances such as glasses, contacts, false teeth, and hearing aids
- Expenses that you pay to travel for medical care, such as mileage on your car, bus fare, and parking fees
- Amounts paid for inpatient hospital care or residential nursing home care, if the availability of medical care is the principal reason for being in the nursing home, including the cost of meals and lodging charged by the hospital or nursing home
- Amounts paid for acupuncture treatments
- Amounts paid for inpatient treatment at a center for alcohol or drug addiction; amounts paid for participation in a smoking-cessation program and for prescription drugs to alleviate nicotine withdrawal
- Amounts paid to participate in a weight-loss program for a specific disease or diseases, including obesity, diagnosed by a physician
- Amounts paid for insulin and prescription medicines or drugs
There are, however, certain expenses that cannot be included in your medical deductions. These include:
- Any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, Wage, and Tax Statement
- Maternity clothes
- Contributions to an Archer MSA
- Expenses paid for with a tax-free distribution from your Archer MSA
- The cost of a prescribed drug brought in (or ordered and shipped) from another country, unless it was legally imported
If you are self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy for yourself, your spouse, and dependents.
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Premiums paid by you and your employer
If you have health insurance through an employer-sponsored plan, you cannot deduct your monthly premiums. However, you can deduct out-of-pocket premiums, provided you do not use a Health Savings Account (HSA) or Flexible Spending Account (FSA) to cover those costs. This only applies if you itemize deductions, and if your total medical expenses exceed 7.5% of your adjusted gross income for the year.
If you are self-employed, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income rather than an itemized deduction for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy for yourself, your spouse, and dependents. If you don't claim 100% of your paid premiums, you can include the remainder with your other medical expenses as an itemized deduction.
If you have health insurance through COBRA, you can deduct these premiums because you pay them out of your own pocket. However, you can only claim the deduction if you itemize, and only if your total medical expenses exceed 7.5% of your adjusted gross income for the year.
If you get insurance in the Health Insurance Marketplace, you can deduct the full cost of your health care premiums from your taxable income, even if you don't itemize your taxes. However, if you can get health coverage through a spouse's plan but choose to go through the Health Insurance Marketplace instead, you are not allowed to deduct the premiums from your taxable income.
Additionally, certain premiums are not eligible for medical expense deductions. You cannot include insurance policies that provide a guaranteed weekly amount during hospitalization, injury, or illness.
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Tax-deductible medical treatments
The IRS allows taxpayers to deduct their total qualified unreimbursed medical care expenses, including insurance premiums and out-of-pocket costs, if they meet certain criteria. Firstly, the unreimbursed medical and/or dental expenses must exceed 7.5% of the adjusted gross income (AGI) for the year. Secondly, taxpayers must itemize their deductions on IRS Schedule A instead of taking the Standard Deduction.
- Inpatient hospital care or residential nursing home care, if medical care is the primary reason for residence.
- Acupuncture treatments.
- Inpatient treatment for alcohol or drug addiction.
- Participation in a smoking-cessation program and prescription drugs to alleviate nicotine withdrawal.
- Weight-loss programs for specific diseases, including obesity, diagnosed by a physician.
- Membership to a health club for the purpose of preventing or alleviating obesity.
- Cosmetic surgery to improve a deformity related to a congenital abnormality, accident, or disease.
- Dental treatment for the prevention and alleviation of dental disease.
- Fertility treatments, including in vitro fertilization, surgery, and temporary storage of eggs or sperm.
- Medical conference admission costs and travel expenses for a person with a chronic illness to learn about new treatments.
- Preventative care, treatment, surgeries, and dental and vision care.
- Visits to psychologists and psychiatrists.
- Prescription medications and appliances such as glasses, contacts, false teeth, and hearing aids.
- Travel expenses for qualified medical care, including mileage, bus fare, and parking fees.
- Transportation expenses, including out-of-pocket costs for a personal car, such as gas and oil, tolls, and parking.
- Ambulance costs.
- Health insurance premiums for self-employed individuals with a net profit for the year.
- Out-of-pocket insurance premiums, provided they are not paid through a health savings account (HSA) or reimbursed by an employer.
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Non-deductible medical expenses
When it comes to filing taxes, it is important to understand what qualifies as a deductible medical expense and what does not. The IRS allows taxpayers to deduct unreimbursed payments for preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care.
However, there are several types of expenses that do not qualify as deductible medical expenses. These include:
- Nonprescription drugs (except insulin) or other purchases for general health, such as toothpaste, health club dues, vitamins, diet food, and nonprescription nicotine products.
- Maternity clothes.
- Amounts you contribute to an Archer MSA or health savings account (HSA).
- Expenses paid with tax-free distributions from an Archer MSA or HSA.
- The cost of a prescribed drug brought in (or ordered and shipped) from another country, unless the drug is imported legally or consumed in a country where it is legal.
- Premiums paid by an employer-sponsored health insurance plan, unless the premiums are included on your Form W-2, Wage and Tax Statement.
- Premiums you pay for certain types of policies that aren't tied to the actual cost of the medical care you received, such as policies that pay a set amount per day for hospitalization.
- Medical expenses paid in a different year.
- Medical expenses that were paid by insurance companies or other sources, whether paid directly to you, the patient, or the provider of the medical services.
- Medical expenses for someone who is not your spouse or dependent.
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Frequently asked questions
Yes, you can deduct insurance premiums from your taxes, but only if you pay for the premiums with after-tax dollars.
Yes, there are a few exceptions. If you have insurance through an employer-sponsored plan, you cannot deduct your monthly premiums. However, you can deduct out-of-pocket premiums if you don't use an HSA to cover those costs and if your total medical expenses exceed 7.5% of your adjusted gross income for the year.
If you have insurance through COBRA, you can deduct the premiums from your taxes because you pay for them out of your own pocket. However, you can only claim the deduction if you itemize your deductions and if your total medical expenses exceed 7.5% of your adjusted gross income for the year.
If you're self-employed, you may be eligible for the self-employed health insurance deduction. This is an adjustment to your income rather than an itemized deduction. You can deduct premiums you paid on a health insurance policy covering medical care for yourself, your spouse, and your dependents.
Yes, other deductible medical expenses include acupuncture, addiction treatment, braille publications, chiropractic services, contact lenses, diet food, exercise programs, and health, dental and vision insurance premiums. Medical treatments such as surgeries and preventative care are also tax-deductible, as are prescription medications and necessary items such as glasses and hearing aids.
