15 Mar Can I deduct medical insurance costs?

Q. Can I deduct medical insurance premiums on my tax return?
— Looking for deductions

A. You can deduct medical insurance premiums, but there are some qualifiers to understand.

You can take the cost of medical insurance as an itemized deduction under the medical expenses category as long as you are paying them with after tax-dollars, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

“Medical insurance premiums, when combined with other out-of-pocket medical expenses, must exceed 7.5 percent of the taxpayer’s adjusted gross income (AGI) before any of the total medical expenses is deductible as an itemized deduction,” Gobo said.

Self-employed taxpayers, Gobo said, you may be able to deduct the health insurance premiums as an adjustment to gross income.

Here are the details, according to the IRS: “You may be able to deduct the amount you paid for health insurance for yourself, your spouse, and your dependents. The insurance also can cover your child who was under age 27 at the end of 2017, even if the child wasn’t your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child (defined in the line 6c instructions).”

It continues: “One of the following statements must be true:
• You were self-employed and had a net profit for the year reported on Schedule C, C-EZ, or F.
• You were a partner with net earnings from self-employment.
• You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
• You received wages in 2017 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.
• The insurance plan must be established under your business. Your personal services must have been a material income-producing factor in the business.
• If you are filing Schedule C, C-EZ, or F, the policy can be either in your name or in the name of the business.”

It also says: “If you are a partner, the policy can be either in your name or in the name of the partnership. You can either pay the premiums yourself or your partnership can pay them and report them as guaranteed payments. If the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premiums as guaranteed payments. If you are a more-than-2% shareholder in an S corporation, the policy can be either in your name or in the name of the S corporation. You can either pay the premiums yourself or the S corporation can pay them and report them as wages. If the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you. You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 in 2017 and you also report the premium payments or reimbursements as wages on Form 1040, line 7. But if you also were eligible to participate in any subsidized health plan maintained by your or your spouse’s employer for any month or part of a month in 2017, amounts paid for health insurance coverage for that month can’t be used to figure the deduction. Also, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2017, don’t use amounts paid for coverage for that month to figure the deduction.”

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This post was first published in March 2018.