Do Not Overlook Health Insurance Tax Deductions

Do Not Overlook Health Insurance Tax Deductions

Are you overlooking one big deduction? Many people do not realize they can deduct the cost of their major medical insurance and some other medical expenses. Make sure you are not paying too much in taxes.Let us look at some ways to deduct your insurance rates from your income taxes! Do you get a medical plan at work where your employer pays some of the cost? If so, you may still be able to deduct some of your costs. If you pay for your part of the premium through an employer pretax plan, you are already getting a tax break. Your contribution will reduce your income. You will have less income to get taxed on. You also get your income reduced because of other medical expenses you pay through this type of pretax plan. These could be medical, dental, or even vision related. Even if your job does not have a pretax plan for medical expenses, you can deduct any medical expenses will total more than 7.5 percent of your adjusted gross income. You can also take advantage of tax deductions for qualified long term care insurance (LTCi and dental insurance. Other medical expenses, that you have to pay out of your pocket, also go into that total. It is important to keep track of your medical expenses every year so you do not miss out on this tax break!Let us consider an example where an employer pays half of the premium. Your family premiums equal $1,200 a month so you pay $600 of that through payroll deduction every month. That equals $7,200 a year. Your employer paid the other half. Let us say your adjusted gross income (AGI) was $50,000. You can deduct any amount over $3,750, which would be 7.5 percent of $50,000. This should reduce your final tax bill. What if you do not have an employer based health insurance plan? Many people work for smaller companies that do not offer group medical benefits. Others are self employed business owners, contract workers, or professionals. If you have to buy individual health insurance, you can deduct the premiums as an expense. This medical insurance can cover you, your spouse, and your children. So the actual cost of the insurance is lower because of the tax breaks. While you can deduct health, dental, and qualified long term care insurance, these rules do not apply to disability insurance or the medical coverage that comes with auto insurance policies. Hopefully you can use these deductions to make your tax bill lower, and your health insurance more affordable! If you are still struggling with your premiums, you may want to run some online insurance quotes so you can find cheaper rates.

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