Private health insurance delivers a range of benefits from preferred choice in treatment options to increased access to specialist care. However, maintaining private healthcare can deliver financial benefits as well. The federal government offers tax advantages to individuals who invest in private healthcare coverage to help minimize core dependence on national healthcare programs, which are constantly strained for resources even when exclusively serving the most needy citizens.
Health insurance paid for out of pocket is the most likely candidate for a deduction. This includes policies purchased directly from the company or through a health insurance exchange, and requires that the amount of the claimed deduction be listed as a medical expense when reporting your taxes for the year.
Self-employed individuals are frequently eligible for tax benefits from maintaining private health insurance coverage as long as they are not eligible for coverage under an employer-sponsored health plan through their spouse. These workers must also earn more in their trade than they’ve paid in insurance premiums to be eligible for the deduction as well, you can read more at HBF.
Some Medicare premiums may be tax deductible as well. Voluntary enrollment is one common factor in the types of Medicare coverage that are eligible for tax deduction, including drug insurance programs and other higher-level benefit plans associated with additional cost.
Health insurance premiums can be deducted from your tax liability as long as they were not paid for with pre-tax dollars, which would represent a double benefit. Examples of pre-tax dollar payments include workplace programs that allow employees to devote a portion of their check to health insurance. Government and employer-backed health insurance is also ineligible for deduction, even if you pay a partial amount.
Regardless of the coverage type, there are limits to the amount of your premiums you can claim as a deductible expense. If you plan to receive your health insurance expenses as a medical expense deduction, the amount is limited to 10 percent of your adjusted gross income. Your total medical expenses, including deductibles and copays as well as premiums, also cannot exceed 10 percent of your income, otherwise the portion above this figure is ineligible for deduction.
The ability to claim health insurance coverage expenses as a deduction when filing taxes is one of the most commonly overlooked ways to reduce tax liability. Comprehensive health coverage can deliver benefits all year, but at tax time the positives become especially easy to diagnose.