Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Deducting health insurance premiums
Old 09-12-2007, 07:16 PM   #1
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Deducting health insurance premiums

My understanding is that you can take health insurance premiums as an adjustment to gross income if you're self-employed and not if you get these as a pretax benefit as an employee. (I'm talking about a standard 1040 income tax deduction, and not about itemizing them as a medical expense.)

My question: can you deduct the premiums if you are employed, decline pre-tax health benefits from your current employer, but pay out of pocket the premiums on a continuation policy from a previous employer?
__________________

__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-12-2007, 09:28 PM   #2
Recycles dryer sheets
 
Join Date: Apr 2007
Posts: 292
I'm no expert, but based on my reading while filing a self employed I do not think that you can.

However that brings up the idea of having some little business in ER in order to deduct the premiums.
__________________

__________________
joesxm3 is offline   Reply With Quote
Old 09-12-2007, 09:56 PM   #3
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by joesxm View Post
I'm no expert, but based on my reading while filing a self employed I do not think that you can..
This link says:
... if you're self-employed and not covered by any other employer-paid plan, you can deduct 100% your health insurance premiums above the line.

Unfortunately, the IRS here says:
You cannot take the special 100% deduction for any month in which you are eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer.
I'm afraid this means that if I decline the 2nd employers benefits, I cannot deduct the premiums for the continuation policy, since I was eligible to participate (even though I declined).


__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 09-12-2007, 10:09 PM   #4
Recycles dryer sheets
 
Join Date: Jul 2005
Posts: 76
If you don't file a Schedule C with self employment income as a part of your tax return, I think a deduction like you are proposing would trigger some questions.
__________________
Gail is offline   Reply With Quote
Old 09-12-2007, 10:45 PM   #5
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by Gail View Post
If you don't file a Schedule C with self employment income as a part of your tax return, I think a deduction like you are proposing would trigger some questions.
Who says you need to file a Schedule C to take an above-the-line health insurance deduction?
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 09-13-2007, 09:49 AM   #6
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Quote:
Originally Posted by Rich_in_Tampa View Post
This link says:
... if you're self-employed and not covered by any other employer-paid plan, you can deduct 100% your health insurance premiums above the line.

Unfortunately, the IRS here says:
You cannot take the special 100% deduction for any month in which you are eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer.
I'm afraid this means that if I decline the 2nd employers benefits, I cannot deduct the premiums for the continuation policy, since I was eligible to participate (even though I declined).
Unfortunately, this appears to be the case.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 09-13-2007, 10:48 AM   #7
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by Martha View Post
Unfortunately, this appears to be the case.
Aargh.

More fodder for negotiation some day, I guess.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 09-13-2007, 12:36 PM   #8
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 90
Quote:
Originally Posted by retire@40 View Post
Who says you need to file a Schedule C to take an above-the-line health insurance deduction?
Well you could have self-employment income flowing through from a partnership, which would reported on Schedule E, but to get a self-employed health insurance deduction you need to be ...self-employed, which, if you're not an active partner in a partnership, generally means filing Schedule C.
__________________
trirod is offline   Reply With Quote
Old 09-13-2007, 12:44 PM   #9
Recycles dryer sheets
 
Join Date: Sep 2005
Posts: 101
The way I understand it is, if you are a W-2 employee and you pay a part or all of your Medical Insurance premiums, it is not deductible on your federal income tax return, unless all your medical bills including your insurance premiums exceeds 7.5% of your income and then only the amount over 7.5% is deductible and only if you itemize.

Jim
__________________
burch64 is offline   Reply With Quote
Old 09-13-2007, 01:05 PM   #10
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by burch64 View Post
The way I understand it is, if you are a W-2 employee and you pay a part or all of your Medical Insurance premiums, it is not deductible on your federal income tax return, unless all your medical bills including your insurance premiums exceeds 7.5% of your income and then only the amount over 7.5% is deductible and only if you itemize.
That's right, Jim. The question was about when you were paying premiums on a policy not offered by your current employer but rather by a previous employer.

I believe from the above citations that you're stuck if you are even eligible for the policy offered by your current employer. No deductions above the line.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 10-10-2007, 03:13 PM   #11
Confused about dryer sheets
 
Join Date: Oct 2007
Posts: 2
I hope somebody here can help me..... I have a question pertaining to deducting health insurance premiums -

I have my own small business, and my husband and I pay for our health benefits through his employer - pre-tax - in the amount of $7,390.

We itemize our health expenses, as my husband has some health problems and we have extremely high health costs. I thought that a portion of the pre-tax health insurance was deductible. Last year my tax preparer deducted a portion of the insurance expense - now, I have a different accountant, and he claims that none of it can be deducted.

Can anyone lend some advice? Anything would be so appreciated. Thanks in advance.

Jody
__________________
Navybean is offline   Reply With Quote
Old 10-10-2007, 03:21 PM   #12
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 90
Jody - if you are paying for the health insurance "pre-tax" then that means that you are already getting a tax deduction for the insurance costs (presumably it is deducted from your husband's gross wages on his W-2), so you cannot then deduct it again on your tax return.
__________________
trirod is offline   Reply With Quote
Old 10-10-2007, 03:43 PM   #13
Confused about dryer sheets
 
Join Date: Oct 2007
Posts: 2
Oh, okay, thanks for the quick reply. I had just thought that the $7,390 pre-tax still translates to over $6,000 post-tax (in my low tax bracket). I can't believe there's no adjustment for that. Wow. And apparently my accountant from last year wasn't clear either then. These medical expenses are crushing us. Without the insurance deduction, our co-pays of over $3,000 are not enough for us to claim.

I tried reading up on the subject on the IRS website - and they mention not being able to claim pre-tax employer health deductions - but that's in regards to the "supermarket" employer health insurance program - which is the one where you put money aside pre-tax yourself (through your employer) and then you have a health account you can draw from. So I was a bit confused.

One more quick question - the self-employed health insurance deduction - is that only valid if I purchase my own health insurance? I get my insurance through my husband, but I myself am self employed.

Thanks again for taking time out of your day to help me.
__________________
Navybean is offline   Reply With Quote
Old 10-11-2007, 10:28 PM   #14
Recycles dryer sheets
 
Join Date: Dec 2006
Location: Florida
Posts: 249
May be applicable to some folks (it was/is to me): you can also (partially) deduct your self-paid health premiums as part of your medical expenses (subject to that 5% floor or whatever it is) -- I itemize some years and sometimes taking this and other deductions beats my standard deduction. It's worth noting that my CPA of several years failed to flag this option for me; I discovered it myself! I'm learning to bunch deductions -- mainly property tax -- so this year I should have a big itemized deduction.
__________________

__________________
I've got nothing against an honest day's work, provided that someone else does it.
pedorrero is offline   Reply With Quote
Reply

Tags
health insurance


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Duh! Health-care premiums are tax deducatble! walkinwood FIRE and Money 16 07-02-2007 02:45 PM
Well, my health insurance premiums are going up 15% next year retire@40 FIRE and Money 9 10-05-2006 11:35 AM
Your health insurance premiums? perinova FIRE and Money 25 05-12-2006 08:25 PM
Health Insurance Premiums wabmester FIRE and Money 16 01-28-2006 04:20 PM
Forbes -- Growth in Health Ins. Premiums Slows intercst FIRE and Money 6 09-15-2005 02:37 PM

 

 
All times are GMT -6. The time now is 02:27 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.