Are Health Insurance Premiums Tax Deductible?
Understanding health insurance premiums can be a bit of a doozy especially in New York City. Whether or not health insurance premiums are tax deductible depends on a few factors, including your income, your filing status, and the type of health insurance you have.
In the United States, health insurance premiums are generally not tax deductible for people who are covered by employer-sponsored health insurance. This is because the premiums are already paid for by the employer and are considered to be part of the employee’s compensation.
Health Insurance Premiums Tax Deductible
However, health insurance premiums are tax deductible for self-employed individuals and for people who are not covered by employer-sponsored health insurance. These individuals can deduct the premiums they pay for health insurance for themselves, their spouse, and their dependents.
To be deductible, the health insurance must be qualified health insurance, which means that it meets certain requirements set by the IRS. These requirements include:
- The plan must be offered by an insurance company or health insurance issuer that is licensed to do business in the United States.
- The plan must cover a wide range of essential health benefits, as defined by the Affordable Care Act.
- The plan must meet certain minimum standards for coverage, such as a minimum deductible and out-of-pocket maximum.
If you are self-employed or not covered by employer-sponsored health insurance, you can deduct the health insurance premiums you pay on your federal income tax return. To do this, you will need to itemize your deductions.
The amount of the deduction is limited to the amount of your adjusted gross income (AGI) that is greater than 7.5%. For example, if your AGI is $50,000 and you pay $4,000 in health insurance premiums, you can deduct $2,500 of the premiums.
If you are not sure whether or not your health insurance premiums are tax deductible, you should consult with a tax advisor.
