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Deducting eligible health costs from your taxable income can help lower taxes and what you owe the IRS, but the types of health costs you can deduct is limited.
Whether health insurance premiums and other costs are tax deductible also depends on how much you spent and whether it’s worth itemizing tax deductions.
Key Takeaways
- You can deduct eligible health insurance premiums from your taxes, but you must itemize your health costs and the total must exceed 7.5% of your adjusted gross income.
- You should only itemize health costs if the total exceeds the standard deduction option for the year.
- Health costs you may itemize include money spent on premiums, deductible, coinsurance and mental health services.
- You can also itemize costs for other types of insurance, including long-term care, vision and dental insurance.
When and How Can I Deduct Health Insurance Premiums From Taxes?
It’s possible you can deduct health insurance premiums from your taxes, but it depends on whether you’re eligible, how much you spent on eligible healthcare costs and how you get health coverage.
Who Qualifies for the Health Insurance Tax Deduction?
The cost of qualifying medical expenses must exceed 7.5% of your Adjusted Gross Income (AGI) to qualify and you must itemize the deductions rather than take the standard deduction.
Remember that if you have an employer-sponsored plan, you can’t deduct what the employer contributed to the health plan. Only what you spent on premiums if they were collected after taxes. If the premiums were collected pretax, they’re not eligible to be deducted again.
Needless to say, you must spend a lot on healthcare in a year to become eligible. People who only went to the doctor once or twice for preventive or basic care won’t likely spend enough to deduct expenses. For instance, if you file singly and your AGI is $200,000, you would need to spend over $15,000 in eligible healthcare expenses to be eligible.
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What Expenses Are Tax Deductible?
Besides health insurance premiums, other eligible medical expenses may include:
What Medical Expenses Aren’t Tax-deductible?
You typically can’t claim the deduction for:
- Cosmetic surgery
- General health improvement programs
- Nicotine gum and patches that don’t require a prescription
- Over-the-counter drugs
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Itemize Deductions vs. Standard Deduction: What Should You Do?
The only time it makes sense to itemize your health insurance and healthcare expenses rather than choose the standard deduction is when the costs exceed both 7.5% of your AGI and the standard deduction amount for the year. Most people take the standard deduction.
The standard deduction is:
- Single or married filing separately: $14,600
- Head of household: $21,900
- Married filing jointly or qualifying surviving spouse: $29,200
Here’s an example of when itemizing expenses may work if you file taxes singly:
- Your AGI is $100,000
- You spent $20,000 on qualifying expenses for the year
- That means you exceeded 7.5%, which allows you to itemize
- The amount is over the standard deduction for a single filer, so it makes sense to itemize expenses
Here’s when to choose a standard deduction:
- Your AGI is $100,000
- You spent $1,000 on qualifying expenses for the year
- That means you did not exceed 7.5%, so you can’t itemize
- The amount is also not more than the standard deduction amount, so it wouldn’t make sense to itemize deductions anyways
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Are Health Insurance Premiums Tax Deductible Frequently Asked Questions (FAQs)?
Are health insurance premiums tax deductible for retirees?
Retirees with health insurance have the same ability to deduct premiums.
As is the case for non-retirees, your itemized health costs must exceed 7.5% of your AGI and it should also exceed the standard deduction amount. Medicare premiums, including Parts A, B, C and D and Medigap, are considered deductible medical expanses.
Are dental and vision insurance premiums also deductible?
You can deduct dental and vision insurance premiums but only if they were taxed. In other words, if you have an employer-sponsored dental or vision plan and the premiums were taken out pretax, you’re not eligible to itemize those premiums.
However, you may itemize them if you paid the premiums after taxes, such as if you bought coverage directly from the insurance company.
Can you deduct contributions to health savings accounts and flexible spending accounts?
You can’t deduct health savings account (HSA) and flexible spending account (FSA) contributions since the savings account contributions are typically made pretax. You can only deduct the savings account contributions if you paid them with after-tax dollars. There are multiple differences between HSA and FSA accounts, but their tax deductible options are the same.
