09 Feb How can I deduct medical costs on my tax return?

Q. I am 70 years old. I have self employment income as well as other income and plan to take the federal self employment health insurance deduction for my Medicare and Medicare supplement insurance premium costs. I know that New Jersey also allows me to take the same self employment health insurance deduction. My insurance premiums, including my spouse’s premiums, exceed 100% of my self employment income. Can I also take the normal New Jersey medical expense deduction for any excess health insurance premiums plus any medical expenses that I have?
— Still working

A. It’s tax time, and there’s a lot to consider when it comes to deducting medical costs.

The law has changed over time, so we’re glad you’re checking.

New Jersey treats medical expenses, including health insurance, differently than how it is reported on the federal return, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

He said federally, you can get an adjustment to gross income to the extent of that self-employment income, for health insurance premiums.

Any excess is carried to Schedule A, combined with your other medical expenses, and reduced by 7½% of your adjusted gross income, Karu said.

“For New Jersey purposes, all medical expenses, including your health insurance premiums, are combined and reduced by 2% of your gross income,” he said. “That amount would be deductible from your gross income.”

As an aside, age doesn’t factor into the calculation, Karu said.

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This story was originally published on Feb. 9, 2023.

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