ACA premiums tax deductible?

[Pilot2013]

For those that are ER'd and using ACA Health Care, are the premiums that you pay (either after your subsidy, or if you don't get a subsidy) tax deductible?

Just curious, as my premiums with my employer sponsored plan is taken out "pre-tax".

Trying to determine my required withdrawal amount for ER, and looking at tax implications....

Thanks!

[travelover]

Not tax deductible. This is a fundamental inequity in the way we pay for health care.

[MichaelB]

Well, the portion of health insurance premiums that exceed 10% of adjusted gross income are eligible for tax deduction.

[Pilot2013]

Wow. I was kind of thinking it might be considered "Self Employed" Health Insurance, which i think is deductible. That sucks.

[pb4uski]

If you are self-employed they are deductible as a business expense. See Don’t Miss the Health Insurance Deduction if You’re Self-Employed

As travelover notes, there are inequities in the tax treatment of those who get their health insurance through work where it is a non-taxed benefit, those who are self-employed where it is deductible to the extent of profits and individuals where it is deductible only if all you qualified medical expenses exceed 10% of income. Another good reason for ultimately divorcing health insurance from employment.

[Alan]

Quote:

Originally Posted by Pilot2013 For those that are ER'd and using ACA Health Care, are the premiums that you pay (either after your subsidy, or if you don't get a subsidy) tax deductible? Just curious, as my premiums with my employer sponsored plan is taken out "pre-tax". Trying to determine my required withdrawal amount for ER, and looking at tax implications.... Thanks!

I'm still on the exact plan with my previous employer and am very thankful that they still have it available for their retirees. However the premiums are now deducted after tax rather than pre-tax.

[lorikmt]

I am self-employed and have an ACA plan, but my understanding is that premiums are not deductible as a business expense unless you have a plan actually established under the business itself. I'm assuming I can't deduct my ACA premiums as a business expense because I opened it on the Marketplace as an individual. If this is not correct, I'd like to know!

[audreyh1]

Only if you are self-employed. Aaargh!

[MichaelB]

I think it depends on how you are organized.

[pb4uski]

Quote:

Originally Posted by lorikmt I am self-employed and have an ACA plan, but my understanding is that premiums are not deductible as a business expense unless you have a plan actually established under the business itself. I'm assuming I can't deduct my ACA premiums as a business expense because I opened it on the Marketplace as an individual. If this is not correct, I'd like to know!

Quote:

Originally Posted by MichaelB I think it depends on how you are organized.

Correct. From the link in post #5 above:

Quote:

There are also some rules that apply to how the insurance plan is established. Follow these guidelines to make sure the plan qualifies: If you’re self-employed and file Schedule C, C-EZ, or F, the policy can be in your name or in your business’ name. If you’re a partner, the policy can be in your name or the partnership’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the partnership must reimburse you and include the premiums as income on your Schedule K-1. If you’re an S corporation shareholder, the policy can be in your name or the S corporation’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the S corporation must reimburse you and include the premiums as wage income on your Form W-2.

[Lakewood90712]

I'm self employed as a Stand-up Philosopher (like Mel Brooks in the movie "History of the World") Does that qualify to deduct ACA premiums ?

https://www.youtube.com/watch?v=IF2RYhNhBdw

[pb4uski]

Sounds like a hobby to me.

[lemming]

Yes. Medical insurance is deductible as a medical expense. You can only deduct the premium you paid not the amount that was paid on your behalf (the subsidy)
Tax Topics - Topic 502 Medical and Dental Expenses

[pb4uski]

Quote:

Originally Posted by lemming Yes. Medical insurance is deductible as a medical expense. You can only deduct the premium you paid not the amount that was paid on your behalf (the subsidy) Tax Topics - Topic 502 Medical and Dental Expenses

Be real careful with that one! Many plans today take the employee deduction out pre-tax rather than post-tax. If the employee deduction is post-tax you are right that it would be deductible, but if pre-tax then not deductible.

Quote:

Payments for insurance premiums you paid for policies that cover medical care or for a qualified long-term care insurance policy covering qualified long-term care services. However, if you are an employee, do not include in medical expenses the portion of your premiums treated as paid by your employer under its sponsored group accident, health policy or qualified long-term care insurance policy. Also, do not include the premiums that you paid under your employer-sponsored policy under a premium conversion policy (pre-tax), paid by an employer-sponsored health insurance plan (cafeteria plan) or any other medical and dental expenses unless the premiums are included in box 1 of your Form W-2 (PDF), Wage and Tax Statement. For example, if you are a federal employee participating in the premium conversion program of the Federal Employee Health Benefits (FEHB) program, you may not include the premiums paid for the policy as a medical expense since they are never included in your gross income.

[user5027]

Quote:

Originally Posted by Pilot2013 For those that are ER'd and using ACA Health Care, are the premiums that you pay (either after your subsidy, or if you don't get a subsidy) tax deductible? Just curious, as my premiums with my employer sponsored plan is taken out "pre-tax". Trying to determine my required withdrawal amount for ER, and looking at tax implications.... Thanks!

It is unclear if you are asking about insurance premiums paid with pre-tax or after tax dollars. You ask about ACA Health Care premiums in retirement then say your employer sponsored plan (before retirement?) premiums are pre-tax.

If the premiums are paid with pre-tax dollars they are not deductible. If paid with after tax dollars, they are medical expenses and deductible subject to limits (such as more than 10% of AGI or 7.5% if you or your spouse born before 1/2/1950). See 1040 Schedule A Instructions and Publication 502.

If you RE, 10% of AGI can be much smaller than health insurance premiums.

[gauss]

Quote:

Originally Posted by MichaelB Well, the portion of health insurance premiums that exceed 10% of adjusted gross income are eligible for tax deduction.

As user5027 correctly points above, it is the total of all medical expenses paid that are in excess of the appropriate percentage (10% or 7.5%) of AGI that are deductible on Schedule A.

Publication 502 (2014), Medical and Dental Expenses contains the list and rules for everything that is considered under this category.


Slides 7 through 14 at the following training site gives an overview of this.

Be sure not to overlook big hitter items like LTC premiums etc. Also medical transportation costs (ie mileage in your personal vehicle using the medical mileage rate/parking fees) also qualify.

-gauss

[audreyh1]

Quote:

Originally Posted by Lakewood90712 I'm self employed as a Stand-up Philosopher (like Mel Brooks in the movie "History of the World") Does that qualify to deduct ACA premiums ? https://www.youtube.com/watch?v=IF2RYhNhBdw

You just need enough income to cover your premiums!

[MichaelB]

Quote:

Originally Posted by gauss As user5027 correctly points above, it is the total of all medical expenses paid that are in excess of the appropriate percentage (10% or 7.5%) of AGI that are deductible on Schedule A.

Yes, you and user5027 are correct.

[Pilot2013]

What I was trying to say:

CURRENTLY, my employer deducts my health insurance premium from my pay check PRE-TAX.

My question is:

When ER'd, is the Insurance Premium I would pay through ACA (of course, not the subsidy) allowed to come out of taxable income (like the Pre-Tax payment of my insurance premiums now). Or only that above the Schedule A limits (10%/7.5%)

[pb4uski]

The latter. Your ACA premium will be included with other medical costs on Schedule A and will be deductible only to the extent that your total medical costs exceed 10% of your AGI.