The rest comes out of your paycheck, tax-free. Most group health insurance premiums are subsidized by your employer and the business pays a large portion of the cost. On Healthcare Marketplace's Website Employer-sponsored health insuranceįor most people, their portion of employer-sponsored health insurance premiums aren’t enough to get deducted from taxable income. Here’s how tax deductions work for various types of health insurance. And even then, “the premiums can only be deducted to the extent that they and other medical costs exceed 7.5% of your Adjusted Gross Income (AGI),” says Hunsaker. You can only deduct the out-of-pocket portion of your employer-sponsored health insurance premium if you take the itemized deduction on your tax return. The rules are much stricter if you’re a W-2 employee. “Self-employed health insurance premiums are deductible as an ‘above the line’ deduction on Form 1040, which means you can deduct the premium even if you don’t itemize deductions on Schedule A,” says Hunsaker. If you’re self-employed and pay all your health insurance premiums, you can deduct the cost from your taxable income. The rules are different if you’re self-employed compared to an employee, says Claire Hunsaker, founder at AskFlossie, a financial community for women. Health insurance costs may be tax-deductible, but it depends on how much you spent on medical care for the year and whether you’re self employed.
You might be able to deduct your health insurance premiums and other health care costs from your taxable income, which can lower the amount of money you owe the IRS come April.
But whether you get coverage through your employer, the Affordable Care Act (ACA) marketplace or a private health insurance company, the premiums can be costly. Health insurance is one of the most important coverage types in your insurance portfolio.
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