Jeffrey Wade
In Washington, there are various ways to receive tax credits or deductions for health insurance. The Washington Health Benefit Exchange offers two types of HRAs to help pay for individual health insurance coverage: Individual Coverage Health Reimbursement Arrangements (ICHRA) and Qualified Small Employer HRAs (QSEHRA). 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. You can also include insurance premiums in your medical expenses, but only if they cover medical care. If you didn't claim a deductible medical or dental expense in a previous year, you can file Form 1040-X to claim a refund for that year.
| Characteristics | Values |
|---|---|
| Self-employed | May be eligible to deduct premiums for medical, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. |
| Self-employed with employees | Can deduct health insurance premiums paid for employees as employee benefit program expenses. |
| Business partner or LLC member | Can deduct health insurance premiums paid directly. If the LLC or partnership pays the premiums, special tax reporting rules apply, but you can still claim the deduction for premiums paid for your coverage. |
| Medical expenses exceeding 7.5% of adjusted gross income | Can be deducted. |
| Medical expenses reimbursed by insurance or employer | Cannot be deducted. |
| Cosmetic procedures | Disallowed by the IRS. |
| Nonprescription drugs | Cannot be deducted (except insulin). |
| Premiums paid by employer | Cannot be included in medical expenses. |
| Premiums paid by you and your employer | Cannot be included in medical expenses. |
| Premiums paid by you | Can be included in medical expenses. |
| Premiums paid by you and claimed as a credit or deduction | Cannot be included in medical expenses. |
| Medical expenses paid in a different year | Cannot be deducted. |
| Medical expenses paid out of a joint checking account | Considered to have been paid equally by both account holders. |
| Health reimbursement arrangement (HRA) | Can be used to help pay for individual health insurance coverage but may reduce or eliminate your premium tax credit. |
| Qualified Small Employer HRA (QSEHRA) | Can be used to help purchase an individual health insurance policy or used with other qualifying coverage. |
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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 you benefit whether or not you itemize your deductions.
You can only claim the health insurance premium write-off for months when neither you nor your spouse were eligible to participate in an employer-subsidized health plan. For example, if you were single and ineligible for any employer-provided health plan during the last six months of the year because you left your job and started working for yourself, you could claim the deduction for those months.
If you have a business and pay health insurance premiums for your employees, these amounts can be deducted as employee benefit program expenses. 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.
In Washington, there are two types of HRAs that can be used to help pay for your individual health insurance coverage: Individual Coverage Health Reimbursement Arrangements (ICHRA) and Qualified Small Employer HRAs (QSEHRA). If you qualify for a premium tax credit through Washington Healthplanfinder, and your employer offers this benefit, your premium tax credit amount will be reduced or eliminated by the federal government.
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Medical and dental expenses
It's important to note that you can only deduct medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). This means that if your AGI is $45,000 and your medical expenses are $5,475, only expenses exceeding $3,375 can be deducted. To claim these deductions, you must itemize them on IRS Schedule A instead of taking the Standard Deduction.
If you're self-employed, you may be able to deduct premiums that you pay for medical, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. This deduction is entered on Part II of Schedule 1 as an adjustment to income and then transferred to page 1 of Form 1040. It's important to note that you cannot claim this deduction for months when you or your spouse were eligible for an employer-subsidized health plan.
Additionally, if you have a Health Reimbursement Arrangement (HRA) through your employer, it may impact your eligibility for a premium tax credit. An Individual Coverage Health Reimbursement Arrangement (ICHRA) can be used to purchase an individual health insurance policy or with Medicare, but you cannot accept the HRA and also receive financial help through Washington Healthplanfinder. A Qualified Small Employer HRA (QSEHRA) can also be used to purchase an individual health insurance policy or with other qualifying coverage, but it will reduce or eliminate your premium tax credit amount.
Remember, it's always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date and accurate information regarding tax deductions for medical and dental expenses.
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Health reimbursement arrangements
In Washington, medical insurance premiums are tax-deductible under certain conditions. Self-employed individuals may be eligible to deduct premiums that they pay for medical, dental, and qualifying long-term care insurance coverage for themselves, their spouses, and their dependents. However, this deduction is not applicable for months when either the individual or their spouse was eligible for an employer-subsidized health plan. Additionally, the health insurance premium deduction cannot exceed the earned income collected from the business.
The ICHRA is an alternative to traditional group health plans offered by employers. It is an account-based health plan that enables employers to provide non-taxed reimbursements to employees for qualified medical expenses. To be eligible for an ICHRA, employees must be enrolled in individual health insurance coverage or Medicare. Employers of any size can offer an ICHRA, as long as they have at least one employee who is not a self-employed owner or their spouse. The affordability of the ICHRA determines an employee's eligibility for the premium tax credit. If the ICHRA is considered affordable, the employee cannot receive the premium tax credit. However, if it is deemed unaffordable and the employee opts out, they may claim a tax credit for themselves and their family members.
On the other hand, a QSEHRA is offered by qualified small employers with fewer than 50 full-time employees or an equivalent number of part-time employees. Similar to the ICHRA, the QSEHRA can be used to purchase individual health insurance policies or with other qualifying coverage. If an employee qualifies for a premium tax credit through Washington Healthplanfinder and their employer offers a QSEHRA, the federal government will reduce or eliminate the tax credit amount.
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Premium tax credits
In Washington, individuals and families may be eligible for the Working Families Tax Credit. To be eligible, you must meet the following requirements:
- Have a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- Lived in Washington for a minimum of 183 days in 2024 (over half the year)
- Be at least 25 and under 65 years of age, or have a qualifying child in 2024
- Filed a 2024 federal tax return
- Be eligible to claim the federal Earned Income Tax Credit (EITC) on the 2024 tax return (or would meet the requirements for EITC but are filing with an ITIN)
The 2024 credit amount varies depending on the number of qualifying children and income level. The maximum credit amount ranges from $325 to $1,290 depending on the number of qualifying children. The minimum credit is $50, regardless of the number of qualifying children.
Additionally, individuals may be eligible for premium tax credits through Washington Healthplanfinder. The amount of the tax credit is based on your income and is set by the federal government. If you are eligible for tax credits, you can choose to use some or all of your tax credit to lower your monthly premium payment, or wait to get all of your tax credit when you file your federal income tax return. You can change the amount of tax credits you use monthly through your Washington Healthplanfinder account.
There are two types of HRAs that can be used to help pay for individual health insurance coverage, but they may reduce or eliminate your premium tax credit for coverage purchased through Washington Healthplanfinder. An Individual Coverage Health Reimbursement Arrangement (ICHRA) can be used to help purchase an individual health insurance policy. To use the HRA, you need to be enrolled in individual coverage or Medicare. You can either accept the HRA or opt out. If you decide to accept the individual coverage HRA, you (and your family members, if applicable) must be enrolled in individual health insurance coverage (or Medicare) for each month you (or your family members) are covered by the HRA. Federal law prohibits you from receiving an ICHRA benefit from your employer and a premium tax credit if your ICHRA is considered affordable. This is true even if you opt out of the HRA.
A Qualified Small Employer HRA (QSEHRA) can be used to help purchase an individual health insurance policy or used with other qualifying coverage. QSEHRAs can only be offered by qualified small employers—those with fewer than 50 full-time employees (or an equivalent number of part-time employees). If you qualify for a premium tax credit through Washington Healthplanfinder, and your employer offers this benefit (even if you do not use it), your premium tax credit amount will be reduced or eliminated by the federal government in accordance with federal law.
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Medical expenses and income
In Washington, you can deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI). This includes unreimbursed expenses for preventative care, treatment, surgeries, dental and vision care, and visits to psychologists and psychiatrists. Unreimbursed payments for prescription medications and appliances such as glasses, contacts, false teeth, and hearing aids are also deductible.
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. You can also deduct the health insurance premiums you pay directly if you are a business partner or LLC member treated as a partner for tax purposes.
If you didn't claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040-X, Amended U.S. Individual Income Tax Return, to claim a refund for that year. This must generally be filed within 3 years from the date the original return was filed or within 2 years from when the tax was paid, whichever is later.
There are also other ways to get financial help with the cost of insurance. Tax credits can lower the cost of your health insurance premium payments each month, and the amount is based on your income. You can choose to use some or all of your tax credit to lower your monthly premium payment or wait to get all of your tax credit when you file your federal income tax return.
Two types of HRAs can be used to help pay for individual health insurance coverage: Individual Coverage Health Reimbursement Arrangements (ICHRA) and Qualified Small Employer HRAs (QSEHRA). However, these may reduce or eliminate your premium tax credit for coverage purchased through Washington Healthplanfinder.
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Frequently asked questions
Yes, in some cases, you may be able to deduct a portion of your medical costs if they exceed 7.5% of your adjusted gross income (AGI).
Deductible medical expenses include fees to doctors, dentists, surgeons, chiropractors, psychiatrists, and psychologists. They can also include inpatient hospital care, residential nursing home care, and treatments for drug addiction or smoking cessation.
Nonprescription drugs (except insulin), cosmetic procedures, and other general health purchases like toothpaste, vitamins, and diet food are typically not deductible.
To claim a medical expense deduction, you must itemize your deductions on IRS Schedule A. You can use tools like TurboTax to help you calculate and file your deductions.
