Deducting health insurance premiums

[Rich_by_the_Bay]

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?

 

[joesxm3]

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.

 

[Rich_by_the_Bay]

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).

 

[Gail]

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.

 

[retire@40]

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?

 

[Martha]

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.

 

[Rich_by_the_Bay]

Unfortunately, this appears to be the case.

Aargh.

More fodder for negotiation some day, I guess.

 

[trirod]

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.

 

[burch64]

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

 

[Rich_by_the_Bay]

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.

 

[Navybean]

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

 

[trirod]

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.

 

[Navybean]

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.

 

[pedorrero]

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.