Health insurance is an essential necessity, yet not always accessible or affordable option. Luckily, the premiums associated with healthcare plans may be tax-deductible to help make them more manageable while keeping more of your hard-earned cash in your own pockets. In this article we’ll go through the fundamentals of tax deduction for health care premiums – understanding this process before filing taxes is key!

Are Your Health Insurance Premiums Tax Deductible? As a self-employed individual, your health insurance premiums may qualify as medical expenses that you can deduct against your tax bill up to 7.5% of adjusted gross income (AGI) in 2018. As long as they meet certain requirements, health insurance premiums may qualify as tax deductible expenses on your tax return.

First and foremost, you need a health insurance policy that fulfills minimum essential coverage requirements. In practical terms, this means your plan should cover at least 10 essential services like hospitalization, ambulatory care, laboratory tests, preventive care and mental and behavioral health services. Furthermore, any premium paid towards long-term care policies required by state requirements that meets minimum federal standards can also be deducted from taxes.

Pre-tax dollars allow you to deduct health insurance premiums when paid with them, and this can be verified through reviewing your paycheck stub. A pre-tax dollar refers to any amount deducted by an employer from your gross earnings before applying income and payroll taxes; additionally, employers sometimes offer tax-free employee benefits like health reimbursement arrangements (HRA). In such cases, any non-medical expenses designated on an HRA will reduce its total value accordingly.

As previously stated, premiums paid with money from flexible spending accounts or similar arrangements cannot be deducted; however, you may deduct the value of unutilized sick leave from your employment if offered this option by your employer.

Finally, Medicare Part A or Part B premiums paid using advance payments of the premium tax credit cannot be deducted; however, Medicare Part D prescription drug plans with minimum income requirements may qualify.

Understanding whether health care premiums are tax deductible can be complex. To get the most from your deductions and ensure you’re making an impactful tax strategy decision for both yourself and employees. Talk with PeopleKeep’s professional for assistance on how offering small business health insurance can boost the bottom line – they are here to help!