IQ expert Jason Beans: Making the most of your health care tax deductions
Q: What sort of tax write-offs are there for health insurance?
A: This varies depending on whether you are self-employed.
If you are self-employed and have no other way of getting health insurance, such as through a spouse, then you can use a Schedule C (Form 1040) to write off your health insurance premium at 100 percent — provided that you’ve made money. You also can deduct medical expenses for yourself, your spouse and dependents if you establish a medical reimbursement plan for your small business.
If yyour employer deducts a portion of health insurance out of your paycheck, those premium dollars normally reduce your taxable income. Hence, these deductions are considered pretax amounts and you can’t deduct any more premiums on your tax return.
The good news is that you can deduct medical, dental, vision and similar costs that you paid out of pocket during the year. This holds true for both employed and self-employed people. You can take these out-of-pocket deductions by filing a Schedule A (Form 1040). Filling out a Schedule A is not a requirement; you can choose the standard deduction based on your filing status. But when you take a standard deduction, you lose the chance to deduct any medical expenses you may have accrued during the year.
If you decide to fill out a Schedule A, remember that there’s a 7.5 percent limit based on your adjusted gross income. So, if you made $100,000, you can deduct only those medical expenses exceeding $7,500. In other words, you’re responsible for the first $7,500.
When it comes to what you can and cannot deduct, the items really run the gamut. Many people overlook medical expenses that can be itemized as deductions, such as eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, co-pays, vasectomies, weight-loss programs, dental treatment, lactation devices, and travel expenses related to medical treatment.
On the flip side, people often try to but cannot deduct medical expenses like health club memberships, dietary supplements, vitamins, prescription drugs ordered from other countries, cosmetic surgery, maternity clothes and teeth whitening.
For an extensive list of which medical expenses you can and cannot deduct on your 2011 federal tax return, visit the IRS website.
Regardless of whether you work for yourself or someone else, be sure to keep your medical bills and receipts. Everything adds up — and your expenses could add up to a healthy tax deduction.
Jason Beans is CEO of Chicago-based Rising Medical Solutions, a medical cost containment/care management company serving the workers’ compensation, group health, auto and liability markets. Beans founded Rising in 1999. Since then, Beans has received a number of honors, including Business Council Advisory Man of the Year and Midwest finalist for Ernst & Young Entrepreneur of the Year. Rising has appeared several times on the Private Company Index’s Top 10 Growth list and Inc. magazine’s Inc. 5000 list.
Beans earned a master’s degree from MIT’s Entrepreneurial Masters Program and a bachelor’s degree in finance from Boston College.
For more information, visit www.risingms.com.
If you have a health insurance question for Jason Beans, please send it to firstname.lastname@example.org.