Some individual taxpayers are able to claim an itemized deduction for their qualified medical expenses, including medical insurance plans premiums. In order to qualify, the qualified expenses must surpass 10% of an individual’s yearly-adjusted gross income. This percentage lowers to 7.5% if you or your spouse reached the age of 65 or older as of December 31st, 2014. In both situations, if you do not reach this percentage, you do not qualify for the deduction. It is essential to track and record every expense related to your healthcare in order to do so.
While most insurance premiums are applicable, a few are not. Be sure to check with your accountant so there are no delays in your filing.
Medicare insurance is coverage that typically begins once an individual turns 65. There are various types of coverage. Here is a brief description of each:
Medicare Part A: Known as hospital insurance coverage. If you are not covered through you or your spouse’s employer, and are required to pay a monthly premium, this premium is considered a qualified health deduction. For some, this could be upwards of $426 a month per covered person.
Medicare Part B: Known as medical insurance coverage. In 2014 alone, the average monthly premium was $104.90 per month. For those in a higher tax bracket, this premium increased drastically to $335.70 per month. Both of these add a significant amount to your qualified medical expenses.
Medicare Part C: Known as the private Medicare Advantage coverage. Premiums are not set and vary based on the plan you choose.
Medicare Part D: Known as prescription drug coverage. Once again, premiums depend on the chosen plan.
Medigap: Known as supplemental insurance. These premiums vary based on the plan.
Were you aware qualified long-term care policies are considered health insurance under the federal income tax rules? This allows these premiums to be treated as a medical cost, and therefore can contribute significantly to your qualified medical expenses. However, there are limits to these amounts based on your age, so be sure to know what your limits are.
Always consult with your tax consultant to see exactly which deductions are applicable to you.