How to Lower Your Taxes and Keep Healthcare Expenses Affordable
Let us help you save up to 30% on Health Insurance
It’s no secret that healthcare and insurance premiums are expensive. But not having health insurance isn’t an option for most, given the fact that a three-day hospital stay can cost you as much as $30,000.
This has many Americans questioning, “are health insurance premiums tax deductible?”. We’ll dive into everything you need to know about healthcare and your taxes, so you can file with peace of mind.
The short answer is maybe. It depends on a few factors, but mainly whether or not your healthcare expenses for the year exceed 7.5% of your adjusted gross income. Your adjusted gross income (AGI) is the total of all of your sources of income, including your wages, capital gains, dividends, rental income, spousal support, and more, but minus deductions from your income like student loan interest payments, retirement plan contributions and more.
Figuring out your AGI and then if your healthcare expenses exceed 7.5% of that will help you answer the question “are health insurance premiums tax deductible?” for your personal situation.Are health insurance premiums tax deductible? Yes. But is there any other way to lower your taxes? Also yes. Medical expenses that you pay out of pocket are also tax deductible, as long as they add up to more than 7.5% of your AGI. This means that as long as you spend enough on things like doctor visits, vision and dental care, hospital care, surgeries, chiropractors, psychiatrists, and more, you can deduct them from your taxes and save yourself some money.
It’s important to note that for both health insurance premiums and medical expenses, only the portion you paid that exceeds 7.5% of your AGI is tax deductible. For example, if your AGI is $75,000 and your expenses were $7,000, you could only claim $1,375 (the amount above the 7.5% threshold, which would be $5,625 in this case).
If you find that your health insurance premiums and medical expenses do exceed 7.5% of your AGI, you’ll then need to decide whether to file your deduction as standard or itemized. The standard deduction is a set amount (for example, $25,100, but if your itemized deductions exceed that amount, then you’ll want to itemize them.
So, are healthcare insurance premiums tax deductible? Yes, and so are eligible medical expenses, as long as you’ve spent more than 7.5% of your AGI. Filing for this tax deduction can net you serious savings each year and help keep your healthcare costs down.
Lauren Lewthwaite Lauren Lewthwaite has been freelance writing for almost five years writing content that ranges from health to insurance and everything in between. Lauren is also a trained translator in French and English and is a dog-mom to an adorable Australian Shepherd.
