Five Taxing Points on Health Insurance Premium & Benefits
IRS Rule for Deduction of Health Insurance Premium & Taxing Benefits
When you buy health insurance, you pay a premium for it. When medical costs rise, the insurance company bears those costs subject to kinds of insurance plant you bought.Your income taxes may be affected by two aspects of your health insurance plan–the premiums and the benefits This post is devoted to benefits of tax insurance of your health brings to you, but not on health insurance credit or Obama care tax benefit or penalty associated with it. Here are three most important taxation aspect of health insurance.
IRS rule allows limited deduction in case of unreimbursed medical expenses that may include insurance premiums paid for hospitalization,surgical, and physician’s expense, and amounts paid out of your pocket for treatment not covered by your health insurance.
Rule says that you can claim deduction for the insurance premium if
- you itemize deductions on Schedule A, and
- your unreimbursed medical expenses exceed 10 percent of your adjusted gross income (AGI) in any tax year.
Then ,you can claim deduction the expenditure above threshold which is 10% of the AGI.
For example, if your AGI is $150,000, then 10 percent of your AGI is $15,000. If your unreimbursed medical expenses amount to $9,000 and you itemize deductions, you can claim deduction upto $6,000 on account of health insurance premium .
Has your employer bear the cost of health insurance for you or your family ? It doesn’t matter whether the premiums paid for an employer-sponsored group policy or an individual policy. You can exclude from total income all those health insurance premium paid from including premiums on health insurance that your employer pays when you are laid off from your job.
Simple rule is that a reimbursement from your employer for health insurance premiums is not taxable income. But , if your employer pays a lump sum not exclusively as reimbursement of health insurance and you use for buying health insurance , in such a scenario IRS will take that lumpsum as taxable income.
Self-employed can deduct health insurance premiums as business expenses
If you are a self-employed individual- meaning thereby sole proprietors, partners, and 2 percent S corporation shareholders- you can deduct health insurance premium paid on their health as business expenditure against business income . Important point to note that
- The deduction from business income is in addition to itemized deduction in Schedule A of Form 1040 that an Individual can claim in his return as described above.
- These deductions are limited to amounts less than an individual’s earned income.
- The deduction is not limited to 10% of AGI , but is allowed 100 percent of the cost of health insurance that you provide for yourself, your spouse, and your dependents.
First of all , important to note is that there is no dollar limit on the amount of tax-free medical reimbursements you can receive in a year.Secondly ,there is no tax on the health insurance benefits or any medical expense reimbursement you receive under any insurance plan . However, if your total reimbursements for the year exceed your actual expenses, and your employer pays for all or part of your health insurance premiums, you may have to include some of the excess in your income.