As you file your 2014 tax return this month, consider your health insurance premiums. They’re an essential part of your budget, and it makes sense to deduct them if you can.
Employer-Provided Premiums
You can’t deduct health insurance premiums taken from your paycheck before taxes were deducted. However, you can deduct premiums you paid with after-tax money. See Schedule A of Form 1040 for details.
Medicare Premiums
Medicare premiums are considered deductible medical expenses in certain cases. Parts B, C and D premiums are deductible on Schedule A of your tax return. Part A is only deductible on Schedule A if you paid for it yourself and did not get it through Social Security.
Self-Employed Health Insurance Premiums
The health insurance premiums you pay as a sole proprietor, partnership partner or shareholder in a Sub S Corporation are deductible if the insurance is for your benefit, purchased in your name and under your business. Use the Self-Employed Health Insurance Deduction Worksheet to calculate your deduction, and list this expense on page 1 of Form 1040 as an adjustment to income. Premiums for your spouse and dependents and dental, vision and prescription coverage may also be deductible.
Utilize Schedule A
Even if you can’t deduct your health insurance premiums on your tax return, you might be able to utilize Schedule A. It itemizes your medical expenses which you can then deduct if they total more than 10 percent of your adjusted gross income. For example, your AGI is $50,000. Ten percent would be $5,000. If your itemized medical expenses total $7,000, you can deduct $2,000. You won’t be able to deduct anything if your medical expenses total less than $5,000.
See IRS Publication 502 for a complete list of medical expenses you can deduct on Schedule A. A short list includes doctor visit copays, prescription medications, medically necessary equipment, dental treatments and vision exams.
Because deducting health insurance premiums can be complicated, see your human resources manager or accountant for more details. Then consider using these tips to prepare for tax season next year.
