A tax deduction is a big concern, and on the other hand, it is highly beneficial because it can help you in various ways. Health insurance is one of the most crucial things that you can consider in your life. And although you may compromise on many things in life, health insurance is surely something where you don’t want to take a chance. This becomes more important when you know that tax deduction can considerably help you pay for health insurance.
The Internal Revenue Service or IRS provides various kinds of deductions for medical expenditures. There are some itemized reductions. Thus, you can make claims for standard deductions. Again some medical deductions are over-the-line exemptions and so all these can be claimed in addition to the standard deductions. With regard to healthcare tax deductions, three options as mentioned below can be chosen.
- In case you find that your expenditure crosses 7.5 percent of the adjusted gross earnings, then you could take an itemized reduction where your expenses surpass the brink. By qualifying medical expenses, you could consider medical, vision or dental care for your own self, your spouse or any individual dependant on you. Medical services include the ones that would prevent problems that could arise in the future, solve present problems or reduce pains. Medical drugs that need a prescription can be deductible. Further, expenses that you may incur in due course of traveling to the hospital in the form of parking fees, mileage, tolls can also be included.
- In order to save for future medical expenditures, health savings accounts are sheltered by the tax. However, in order to be eligible for this, you also need to possess a health insurance plan which has a high deductible. Every year, your contribution can go up to a limit set on the basis of the fact as to whether the health insurance plan is just meant for you or also includes your family.
- Health insurance deduction can also be seen when you are self-employed. If you are in a partnership or you are the owner of greater than 2% of a corporation, you would be able to deduct the price of your health insurance policy and also that of your spouse and any other individual dependant on you. But if you have to qualify for the deductions, your policy should be in your name, that is, the name of the self-employed person, business or partnership. In this deduction, qualified long-term care premiums can be included. But again, there is a limit to the deductible amount because the age of the insured plays an important role in this. This deduction would affect your income tax. But as far as the decrease of your tax liability is concerned, this deduction would not be of any help. As a self-employed individual, you could deduct health insurance premiums from federal income taxes. As a taxpayer, you would be offered huge exemptions that could bring down the taxable income and thus lower the total amount that you would pay in federal income tax.
In order to understand more about tax deduction and the way it helps health insurance, you should have a clear idea about the following.
If there is a group health insurance provided through an employer then the tax exemption can be enjoyed. In such a scenario, probably your employer is paying the premiums of your insurance from your gross income before holding back federal tax income. This way your yearly tax income comes down and thus you will have a reduced tax bracket. In case your employer is not offering health insurance, you should ideally buy an individual health insurance policy from a private insurance organization. This might also be the case if you prefer to have a completely different coverage plan other than what is available. But again in order to avail tax deductions on health insurance in this regard, you need to note that you will only be able to deduct your private health insurance premiums on your federal income taxes if they are greater than 7.5 percent of your adjusted gross earnings
A tax deduction can also be seen in long term health care. The number of adults who need long term health care is on a sharp rise. With the constant increase in health care expenditure, it seems that every single year, insurance coverage is getting lesser with respect to the total expenses for health care. Here, if you can comply with certain qualifications, then you can deduct the cost of long term health care on the returns of your income tax. There are certain long term medical care expenses that are deductible. These include the costs incurred for diagnosis, medical treatment, healing and preventing an ailment. Certain drugs that need a prescription are also deductible. With respect to long term medical care, the expenses include the cost incurred on nurses or certain care facilities on a long term basis, provided these have been prescribed specifically by a doctor. Health insurance payments can be deducted by you in the total expense, but again you would not be allowed to take health insurance deduction pertaining to life and disability.
While availing the benefits that tax deductions can do to health insurance, you need to make a note that all deductions should be the expenses paid during the year of tax filing from January 1 to December 31. In case you are mailing a payment on the last day of a year, that is the 31st of December then it will surely be considered to be the expenditure for that particular calendar year.