Medical Insurance Tax Question

[GravitySucks]

Think I've missed out on some tax savings the last couple years.
I pay a bit over half of my medical insurance, while MegaCorp picks up the rest. (About 55/45%). This is about 13% of my income.
I think it's partially deductible.

From IRS:
olicies that cover medical care or for a qualified long-term care insurance policy covering qualified long-term care services. However, if you're an employee, don't 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, don't 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're 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

I think I must have answered a TurbotTax question wrong as I remember it saying I didn't qualify. Or am I misreading the IRS.

Do you write off partial insurance payments?

Might be time to see a tax pro. Been relying on TT for a long time.

 

[pb4uski]

I think you are probably ok.

Most premiums are paid with pre-tax dollars, which means they are deducted from your wages before taxes are applied. Deducting them again as a medical expense would be "double-dipping." You can only deduct the premiums if your employer included them in Box 1 (Gross Wages) of your W-2.

 

[SecondCor521]

Thread-stealing maybe a bit here.

1. Can I deduct on line 1 of schedule A my ACA subsidized premiums since I'm retired?
2. Do I have to adjust them somehow for the inevitable difference between my estimated income and actual income (form 8962 reconciliation)?
3. Does it matter that my ex reimburses me for a portion of the premiums per our divorce decree where we share medical insurance premiums in proportion to our incomes?

Thanks!

 

[pb4uski]

Unless the net amount that you pay (after subsidies and ex-spouse reimbursement) exceeds 10% of your AGI you don't get any benefit from itemizing medical expenses anyway.... which makes it a moot issue for most people.

 

[SecondCor521]

Right, but I might have a very low AGI this year and may exceed the 10% hurdle. Thus my questions.

 

[pb4uski]

I dunno for sure but was just trying to avoid your going on a wild goose chase. My guess would be that you could deduct what you pay after subsidy adjusted for reconciliation and after any reimbursemnets from your ex-spouse.

I seem to recall thread on the first part a little while ago.. you could run your expected situation through TurboTax to find out.

 

[SecondCor521]

Understood, thanks. Eyeballing it I'd probably be over the 10% hurdle and it would be worth it if I could add in OOP stuff (copays and prescriptions). But it'd be hard to figure since my ex also reimburses me for her 32% of that stuff also.

But then since I probably won't even hit the standard deduction I guess it's a moot point. Thanks.

 

[cathy63]

Yes, medical insurance premiums paid with after-tax money are deductible on Schedule A. If you use TurboTax (or presumably any other tax software), it will do the math automatically. We don't get a tax credit or subsidy, so I don't know if you have to make an adjustment.

Don't forget that medical expenses also includes dental, prescriptions, equipment, etc.

 

[scrabbler1]

Thread-stealing maybe a bit here.

1. Can I deduct on line 1 of schedule A my ACA subsidized premiums since I'm retired?
2. Do I have to adjust them somehow for the inevitable difference between my estimated income and actual income (form 8962 reconciliation)?
3. Does it matter that my ex reimburses me for a portion of the premiums per our divorce decree where we share medical insurance premiums in proportion to our incomes?

Thanks!

#1 and #2, Yes. I have been doing this since 2014. You do have to net out any ACA subsidy, whether it is overpayment or underpayment. You might have to apply any additional subsidy claimed or additional payment due from Form 8962 in the following year's tax return, if you itemize in that year.

Not sure how it works for #3.

 

[GravitySucks]

I think you are probably ok.

Thanks.

I'm paying my share out of my 401k withdrawals.... Seems it should be deductible.

Medical Insurance Tax Question

Yes, medical insurance premiums paid with after-tax money are deductible on Schedule A. If you use TurboTax (or presumably any other tax software), it will do the math automatically. We don't get a tax credit or subsidy, so I don't know if you have to make an adjustment.



Don't forget that medical expenses also includes dental, prescriptions, equipment, etc.

http://www.early-retirement.org/forums/showthread.php?p=1958992


Thanks Cathy

 

[SecondCor521]

#1 and #2, Yes. I have been doing this since 2014. You do have to net out any ACA subsidy, whether it is overpayment or underpayment. You might have to apply any additional subsidy claimed or additional payment due from Form 8962 in the following year's tax return, if you itemize in that year.

Not sure how it works for #3.

Thanks! And thanks to @cathy63 also!

 

[MichaelB]

Think I've missed out on some tax savings the last couple years.
I pay a bit over half of my medical insurance, while MegaCorp picks up the rest. (About 55/45%). This is about 13% of my income.
I think it's partially deductible.

./.

I think I must have answered a TurbotTax question wrong as I remember it saying I didn't qualify. Or am I misreading the IRS.

Do you write off partial insurance payments?

Might be time to see a tax pro. Been relying on TT for a long time.

Is the share you are paying coming from your W-2 taxable income? If so, you can itemize it on Schedule A. If it is 13% of your income, then 3% will add to your net itemized deductions.

If this was the case last year, and it would have led to a higher deduction / lower tax, you can refile 2016 (and 2015).