If you go to any news website (or if you’re old school, open a newspaper), you’ll quickly see a lot of articles talking about healthcare and health insurance. It’s everywhere right now.
While we’re not going to give our opinions of ACA vs. AHCA, we do think this is a wonderful time to talk about health insurance.
Specifically, how health insurance plays into your taxes.
The first thing most people want to know when talking about taxes is “can I deduct that?”
Premiums are (Usually) Not Deductible
Your insurance premium is the fee you pay every month to have health insurance. Just like your car insurance premium, home insurance premium, and any other premium you might be paying, this is not tax deductible. It’s simply an expense of life.
Most of the time.
In cases such as self-employment, you may be able to deduct part of your premium. In a normal job situation, your employer would be responsible for part of your health insurance. Since you don’t have that luxury as a self-employed person, there may be a deduction opportunity.
You May Be Able to Deduct (Some) Medical Expenses
Whether you’re self-employed or not, you may be able to deduct some of your additional medical expenses, depending on how much they are.
Of course, if you’re reimbursed for these expenses or you’re paying for them with pre-taxed money, you won’t receive any deduction.
No Insurance Penalty
While having health insurance won’t really affect most people’s taxes, not having health insurance can leave you owing more at the end of the year.
One of the many things the Affordable Care Act (colloquially known as Obamacare) introduced was a no-insurance penalty. You can go up to three months without health insurance. After that, you’ll pay a penalty for every month you go without insurance.
While this penalty was initially very small, it has gone up significantly over the past few years.
The fee calculation depends on a number of factors. Ultimately, it’s calculated in one of two ways.
Go a year without insurance, and you will pay either 2.5% of your income or $695 per adult and $347.50 for every child under 18. Whichever is higher. The maximum can range from $2000 – $2700, depending on your situation.
This penalty is calculated into your taxes at the end of the year.
There are Exemptions to the Insurance Penalty
Some people have legitimate reasons for not having health insurance. Whether it’s a sudden hardship or life event like job or spouse loss, you lost your coverage for another reason, or you’re struggling financially, you may be able to wave the no-insurance penalty.
Exemptions are approved on a case by case basis and will often require sending in an application.
Need More Guidance?
By themselves, both health insurance and taxes are very complex and confusing. Put them together, and you have a recipe for some serious headaches. While we can’t help you find the best health insurance policy, we can help you navigate the tax side of things.
At LWS, we handle everything from personal taxes to professional payroll services in Springfield, Ohio. Contact us today!