Yes, your monthly Medicare Part B premiums are tax-deductible.
Insurance premiums are among the many items that qualify for the medical expense deduction. Since it’s not mandatory to enroll in Part B, you can be “rewarded” with a tax break for choosing to pay this medical expense.
Follow the Rules to Deduct
However, you can only benefit from the medical expense deduction by following specific rules. You’ll need to file your taxes in a certain way, itemizing your deductions instead of choosing the standard deduction. Additionally, your medical expense deductions only begin to count after they surpass 10 percent of your Adjusted Gross Income. Adjusted Gross Income, or AGI, is your total pre-tax income before certain non-itemized deductions such as health savings account spending.
Depending on the circumstances, you may be better served by not deducting medical expenses. You may only want to deduct medical expenses in one year, and not another.
However, if you’re actively self-employed, you can deduct your entire health insurance premium. You’ll have the opportunity to do so even if you don’t itemize your deductions. This deduction will be entered on your Form-1040 in a section separate from your other medical deductions on Form 1040-A.
- You’ll need to be truly self-employed, with no employees. The IRS lists a few additional qualifications that you’ll need to follow, but in general, “it can be one of the largest deductions you have”.
A tax deduction – like the well-known medical expense deduction – reduces the amount of money that you have to pay taxes on. Choosing to take the medical expense deduction gives you a write-off that will reduce, but not erase, the taxes that you owe.
Taking the Next Steps
Keep collecting bills or receipts for your medical expenses. You can see if you’ll want to aim for a medical expense deduction by reviewing your spending and income for the current year. More importantly: this is not tax advice – speak with a qualified tax professional to learn more.