Looking for Health-related Tax Tips?
Yes, it’s that time of year again and if you need some extra motivation to get your taxes done, here are some of our favorite health-related deduction ideas to help you out with your federal tax return.
Be sure to ask your accountant which of the following apply to you:
1. Deduct your health insurance and medical expenses – If you itemize on your federal tax return, you may be able to deduct medical expenses from your taxable income.
Qualifying medical expenses may include:
- Monthly premiums: What you pay each month for health insurance
- Copayments: Track what you pay in co-pays for doctor visits and other services
- Deductibles: Track what you paid against your deductible
- Dental expenses: Certain dental expenses qualify
- Costs not covered by insurance: Costs for some services not covered by your insurance plan may be deductible.
- Mileage: You can even deduct mileage accrued while driving to and from medical appointments.
If you or your spouse are already receiving Social Security or are on Medicare
- Medicare Part B: Premiums taken from your Social Security checks to pay for Medicare Part B qualify as deductible
- Medicare Part D: Premiums paid for Medicare Part D (Prescription Drug) may qualify as deductible
- Medicare Supplements: Premiums paid for a Medicare Supplemental plan may qualify as deductible
Here’s the catch: you can only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income. That’s a big hurdle for most people, but if you were seriously ill or hospitalized last year, you may qualify.
2. Deducting health insurance premiums as a business expense – If you had self-employment income in 2011, you may be able to deduct health insurance premiums you paid for yourself and your dependents as an ‘above the line’ business expense (without itemizing).
- Be aware: You may not deduct premiums paid for any month in which you were eligible to participate in an employer-sponsored health insurance plan, and that the amount you deduct cannot be greater than your net self-employment income for the year.
- Keep in mind: You can’t include what you paid toward your monthly premiums as an ‘above the line’ expense and also itemize it.Talk to a tax professional to learn more about the different types of self-employment statuses and the tax implications of each.
3. Deducting expenses for the care of an aging parent – Many of today’s baby boomers are taking care of elderly parents. If that’s you, you may be eligible for a deduction.
How might you qualify?
- Your Parent’s Income: If your elderly parent earned less than $3,700 in 2011 (excluding Social Security)
- Your Financial Support: And, if you provided more than half of your parent’s financial support, you may be able to claim them as a dependent.
This earns you an additional dependent exemption, even if your parent doesn’t live with you. Additionally, if you paid for the medical or nursing care of a dependent parent, you may also be able to itemize those costs as qualified medical expenses.
4. Deducting home improvements – If you or a dependent required changes to your home due to a chronic medical condition it may be easier to meet the 7.5% adjusted gross income threshold to deduct itemized medical expenses.
- Deducting Capital Expenses: In addition to your out-of-pocket costs for medical, dental or vision care, you may also be able to deduct capital expenses for the installation of home medical equipment or improvement of your property for wheel-chair access.
5. Getting the most from your Health Savings Account (HSA) – If you have an HSA, be sure to deduct your contributions up to the federally prescribed limits.
Contributions to your HSA designated for 2011 and made before April 17, 2012 can be counted toward your 2011 federal taxes.
6. Caps on 2011 HSA contributions:
- $3,050 for individuals
- $6,150 for families
- An extra $1,000: If you’re over age 55, you may qualify to make an additional $1,000 contribution for the year.
Photo via Flickr User kenteegarden