If you pay for health insurance for your family or for yourself from your own pocket, you are eligible to deduct the costs from the federal income taxes. You should understand that this deduction is an itemized deduction. This means that you will be able to claim the deduction only if you forgo the standard deduction. However, the deduction will be reduced to the amount that exceeds 7.5 percent of the adjusted gross income.
Adjusted gross income is a measure of income that is used to find out the amount of your income that falls in the taxable range. This is nothing but gross income minus adjustments to income (allowable deductions). If you are looking for the answer to the question, “are health insurance premiums tax deductible,” this article will help you find an answer.
- File the tax returns using the form 1040. Make sure that you attach the Schedule A with this. Schedule A will list your itemized deductions. You will not be able to claim back your deductions, if you have not itemized your deductions.
- You can report the total amount of the health insurance costs on line 1 of the schedule A. Please note that you are allowed to include those health insurance costs for which you have not claimed the reimbursement.
- As the next step, copy down the adjusted gross income from the line 38 of form 1040 tax return on to the line 2 of Schedule A.
- Multiply the adjusted gross income by 0.075. Report the value that you get on the line 3 of Schedule A. For example, if your adjusted gross income is $40,000, you will have to multiply it by 0.075 to get $3,000.
- Subtract the result that you got from step four from the total deductible health insurance costs. This will help you get the deduction. Report this deduction on line 4 of the Schedule A. In this example, if your costs equal $5,000, you should subtract $3,000 from $5,000 to get your deduction, which equals $2,000.
These are the simplest steps to deduct your health insurance from a tax return. I hope that you got the answer to the question “are health insurance premiums tax deductible.” If you still have any concerns or queries, you may seek advice from a tax practitioner. He will be able to clear all your doubts and proceed without any difficulties.