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Is medical insurance tax deductible?

Posted by cissado (My Page) on
Sun, Nov 18, 07 at 17:23

Our medical benefits are quite high ($389/twice a month for a family of four). I was wondering if we dropped this coverage and purchased a separate policy outside our employer's coverage, if the payments would be tax deductible if we itemized our taxes?

Rates I've been looking at have been lower and higher, but with the potential tax savings, we may get better coverage for the same or less out of pocket. We're in NJ btw.


Follow-Up Postings:

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RE: Is medical insurance tax deductible?

This is really a tax advisor question - I always understood ordinary medical expenses, including premiums (through an employer or on your own) are not tax deductible until they exceed 7.5% of your adjusted gross income (AGI).

And then, it would just be the overage beyond the 7.5% threshhold that would be deductible on an itemized tax return.


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RE: Is medical insurance tax deductible?

Thank you duluth. There is the benefit of paying the premiums through the employer PREtax though. So that would be the benefit if we took the employer's insurance. If out on our own, I'm assuming we'd pay a penalty by paying the whole amount with after tax dollars.


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RE: Is medical insurance tax deductible?

Health insurance costs are not tax deductable. Stay with the pre-tax, employers insurance. Less than $800 per month for a family policy seems reasonable to me. You'd be surprised how high insurance costs are out here are for those of us without an emploer's package.


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RE: Is medical insurance tax deductible?

I agree with what Duluthinbloom said.

Health insurance premiums that you pay with after tax dollars are included as a medical expense on Schedule A. Only medical expenses that excede 7.5% of your AGI are deductible. So, the premiums that you pay for with after tax dollars may fully, partially or not deductible depending on your individual situation.

Health insurance premiums that you pay for with pretax dollars are never deductible. If you pay health insurance premiums as a payroll deduction, I suggest you check with your employer to see if they are paid pretax or after tax. Most are paid pretax.


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RE: Is medical insurance tax deductible?

I suggest get a low cost high deductible health insurance and open up a Health Savings account which contributions to are tax deductible. An internet search on HSA or Health Savings account should turn up all the info you need. Set it up by the end of the year and write off as much as $5650 for '07 (even if you dont itemize). This is an incentive to stay healthy as money in the account you dont use can be saved and invested to pay med expenses tax free. No state tax break in a few states including CA though.


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RE: Is medical insurance tax deductible?

I'd recommend a good accountant. Ours saves us many, many times his fee every year. He knows what is and is not deductible. And it doesn't take long, in NJ, for your health expenses to exceed the allowed amount. We ALWAYS get a decent medical deduction--we claim our medical premiums, co-pays, my shoes (prescribed for a food condition), cost of meds, eye glasses, etc, and it adds up to well more than the standard allowed deductible. And we're pretty healthy people.

I'd say it's well worth looking into, by asking someone who is a certified accountant (skip the employees of that highly advertised store front tax chain--they only get a few weeks course in tax prep, and the returns they prepare have a very high percentage of being audited).

You can do quite well, in NJ, though by itemizing and declaring your medical expenses.


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RE: Is medical insurance tax deductible?

"I'd say it's well worth looking into, by asking someone who is a certified accountant (skip the employees of that highly advertised store front tax chain--they only get a few weeks course in tax prep, and the returns they prepare have a very high percentage of being audited)." Azzalea

Please remember that not all CPAs are good tax preparers. There are many who are. Most CPAs dont actually prepare the returns themselves. They have a "back room" that does the tax prep. The CPA may review the return in detail or may not even look at it.

What Azzalea says about the chain tax prep firms is a common misconception. There are tax preparers at those chains that have been doing taxes for over 10 or more years. I know several that have been doing tax returns for over 20 years with those big chains. Id like to know where azzalea got the information that leads azzalea to believe that the chains have a very high percentage of audits. I have never seen a statistic published by the IRS that shows this.

The key to finding a tax person is to ask about their experience with returns similar to yours. Ask about the guarantee that your return is done correctly. Ask if they will go to an audit for no additional fee if you audited.

Back to the original question, whether or not you have enough medical expenses depends on your situation, your income, your medical expenses and how many other itemized deductions you have.


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RE: Is medical insurance tax deductible?

Thanks for all the rplies. I will look into a tax preparer.

The original question was if the premiums were tax deductible if paid outside of the employer's weekly check. I do understand I should get a preparer anyway.

We may want to start a small business and may need a lawyer/tax professional. Not sure where to start looking really. It may be benificial for us to go that route, re small business and pay everything ourseves instead of being on the payroll. Possibly more deductions, but that's what the professional is for, I guess. I do need someone who specializes in small business tax prep and more importantly, tax advise/planning.


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RE: Is medical insurance tax deductible?

If you report the income and expenses from your business on a Schedule C , there is an adjustment for the cost of health insurance that you can take. The adjustment happens on page 1 of the 1040 and is limited to the net income from the Schedule C business minus 1/2 of SE tax. You can only take this adjustment if you do not have any other health insurance available from an employer. If there is insurance available from your employer and you choose not to buy it, you cannot take the adjustment.

Hope that helps.


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RE: Is medical insurance tax deductible?

It is for me. I have to give it to my accountant every year. I remember because that is the one thing I forget to put on my list. I file short form.


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