When Can You Claim a Health Insurance Deduction?
Not too many people enjoy paying for health insurance, but it’s nice to have it when you need it most. The problem is health insurance is very expensive today and can be a great financial burden for individuals and families. When you look at the tax deductions list, there are some qualifications you may meet to receive a health insurance deduction. These deductions can help increase your tax refund or potentially reduce your tax liability significantly. We’ve explained how you can qualify and help you to understand when health insurance may not be deductible depending on your situation.
Health Insurance And Self-Employment
Paying for health insurance while self-employed can be a major financial burden. The good news is if you are not eligible for a health plan through your spouse’s employer, then you can deduct some of the premiums paid on your tax return. The amount you deduct just can’t exceed the amount of income earned in any given year. Most of the time, people who are self-employed have to pay health insurance premiums with after-tax dollars. In those cases, the premiums paid are tax-deductible since you’ve already paid taxes on the income earned.
Know What Health Insurance Is Not Tax-Deductible
Even though health insurance premiums are tax-deductible, you can’t deduct the costs if your employer pays all of it. However, if the employer only pays a portion of the premiums for you, then you can deduct the premiums you paid directly. The catch is you likely pay your insurance premiums with pre-tax dollars if it gets taken directly out of your paycheck. In those instances, the premiums are not tax-deductible since they were paid with dollars free of income tax. Your tax professional can help you sort out these complications and help you maximize the amount you can deduct on your taxes.
Understanding Limitations And Qualifications
With the cost of health insurance being so high, it’s understandable people want to explore every possible option to get some tax relief. To deduct health insurance from your taxes, you have to itemize your deductions and the health-related expenses have to be more than 7.5% of the adjusted gross income you earned. However, if you’re self-employed, then you don’t have to meet the 7.5% requirement since the premiums are considered to be a self-employment income adjustment rather than an actual tax deduction.
Americans have enough responsibilities without needing to know specific tax laws. You deserve to get the most tax relief possible and Rocket Tax Relief is here to help. Health insurance is always a hot, and sometimes controversial, topic and we keep up with all of the latest laws and qualifications for tax purposes. The global pandemic has also impacted health insurance deductions, so you may qualify for even more tax relief if you have been directly impacted financially. Let us do a lot of the work for you when it comes to tax preparation and contact us today to see how we can help.