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Medicare Premiums and Taxable Deductions


Each year, the Internal Revenue Service allows American citizens to deduct personal expenses from their taxable income. However, the Internal Revenue Code is particular about what can be deducted and who can claim these deductions. Therefore, not all regularly incurred costs are eligible for deduction. These federal deductions decrease the amount of income subject to federal income tax and reduce the burden during tax season. Therefore, many American citizens — including Medicare beneficiaries, are always on the lookout for appropriate tax deductions.

Are Medicare Premiums Tax-Deductible in 2021?

As a Medicare beneficiary, you’re probably wondering if your monthly Medicare premiums are tax-deductible. The answer is yes; some Medicare premiums are tax-deductible. Most insurance premiums qualify for Form 1040’s Schedule A deductions but only over a certain threshold, including some Medicare premiums.

This amount will be subtracted from your gross income. Your taxable income (after the deductions are made) will ultimately be used to determine what you owe in taxes. We’ll introduce the four major categories of tax deductions to familiarize you with the concept if you aren’t already familiar with them.

What Are the Four Major Categories of Tax Deductions?

  1. Business Deductions
  2. Standard Deductions
  3. Above the Line Deductions
  4. Below the Line Deductions

What is a Business Tax Deduction?

Business owners are required to incorporate their business earnings when they file their tax returns. Sole proprietors do this by a separate calculation of net profit or loss where all income and deductions are reported.

What is a Standard Tax Deduction?

The purpose of standard tax deductions is to allow taxpayers to claim the standard amount set by the IRS. They can claim this amount for the deduction if they haven’t itemized deductible expenses. This amount changes by year, and the IRS website has a tool you can use to calculate your standard deduction.

What are Above the Line Tax Deductions?

Before you calculate your final taxable income, you must first know your Adjusted Gross Income (AGI) for your personal tax return. The AGI is your gross income minus adjustments, such as student loan interest, retirement account contributions, and alimony payments. Another example is work-related moving expenses. Above the line tax deductions refer to the types of contributions and payments mentioned above. Those amounts get deducted before your AGI is calculated.

What are Below the Line Tax Deductions?

Below the line tax deductions are related to the expenses you itemize on your Schedule A attachment. They’re restricted depending on your AGI. This category includes medical, dental, and miscellaneous work-related costs. Your Medicare and Medicare Supplement deductions fall into this category.

Are Medicare Supplement Premiums Tax-Deductible?

Medigap premiums are subject to tax deductions. When tax time comes, Medicare Supplement premiums are treated as a standard medical expense.

Tax-Deductible Medicare Premiums for the Self-Employed

If you’re self-employed, earning a profit from said self-employment, and on Medicare, you’re allowed to deduct all Medicare premiums from your taxable income as of 2012. You can also deduct all your spouse’s Medicare premiums if you’re self-employed.

To qualify as self-employed by the standards of the IRS, you must be one of the following:

  • A sole proprietor or independent contractor in a trade or business
  • A member of a partnership in a trade or business
  • Otherwise in business for yourself

Are Medicare Part A Premiums Tax-Deductible?

If you’ve worked enough quarters, you aren’t writing a check for your Part A premium; it’s coming out of your Social Security check. Obtain your SSA-1099 from the Social Security Administration to keep track of these costs. If you haven’t worked the necessary 40 quarters and don’t get Part A premium-free, your Part A premiums could be tax-deductible.

Are Medicare Part B Premiums Tax-Deductible?

Everyone with Part B pays a premium, and the premiums are eligible for tax-deduction.

Are All Medicare Expenses Applicable to Deductions?

Not all Medicare Supplement expenses are applicable for tax deductions. Although the cost of Medigap premiums is subject to tax deductions, not all expenses are deductible.

Medigap premiums are considered a medical expenditure and follow the guidelines for this type of deduction. Medical expenses are only deductible if they’re itemized by the taxpayer in their personal income tax returns.

After medical costs exceed 7.5% of the beneficiary’s AGI, they qualify for tax deductions. Most Medicare beneficiaries are 65 years and older, many retired. Because of this, their AGIs are generally lower, and they’re likely to benefit from this tax deduction.

What Are the Allowable Tax Deductions for Medicare Beneficiaries?

Any costs associated with the treatment or diagnosis of a medical condition or an injury can be deducted. This includes preventive care and the cost of any medical equipment or supplies. The IRS provides a list of deductible medical expenses. The list includes some items you might not expect. Among these items is the cost of altering your home to install medical equipment and transportation costs.

FAQs

Do Medicare premiums reduce taxable income?
Your Medicare and Medigap premiums can be deducted from your taxes as a below the line deduction. This requires you to itemize the premiums. If they, along with your other medical costs, exceed 7.5% of your Adjusted Gross Income (AGI), you qualify for the deduction.
Can Medicare deductions be combined and claimed jointly as a couple?
Even though Medicare Supplement policies aren’t joint plans, couples can file their returns jointly and combine their deducted premiums.
If my company sponsored HRA reimburses me for my Part B premium, can I deduct it on my tax return?
No, only premiums you pay out of pocket that aren’t reimbursed can be deducted from your tax return.
Do you have to show proof of health insurance when filing taxes?
While you don’t need to send the IRS proof of healthcare coverage, the IRS still recommends keeping these records.

How to Find Affordable Medigap Plans Today

Medicare isn't free and we understand your desire to save money wherever you can. If you've been considering a Medigap plan but have been hesitant because of the price, we can help you compare plans and rates. Please call us at the number above or fill out our online rate form to get started.

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Lindsay Malzone

Lindsay Malzone is the Medicare expert for MedicareFAQ. She has been working in the Medicare industry since 2017. She is featured in many publications as well as writes regularly for other expert columns regarding Medicare. You can also find her over on our Medicare Channel on YouTube as well as contributing to our Medicare Community on Facebook.

16 thoughts on “Medicare Premiums and Taxable Deductions

  1. Hi Lindsay Engle
    I had ask you question I had issues with my Medicare part a b 148 they take out my social security check 765 for mouthy not receive fully amount 913.00 Can you give me information how to fix it 0.00 I had SSDI. Benefits.

    1. Hi Sean! The amount deducted from your Social Security check is to cover the monthly premium for Part B. If your income is low enough, you may qualify for a Medicare Savings Program to help cover this cost. You can also look into a Medicare Advantage plan that comes with a give-back benefit to lower the amount that’s deducted from your check.

      1. Do you know which one? Did you get approved for Qualified Medicare Beneficiary (QMB) Program, Specified Low-Income Medicare Beneficiary (SLMB) Program, or Qualifying Individual (QI) Programs?

      2. I had my plan for Medicare Full Extra Help (you pay $0 premium, $0 deductible, and $3.70-$9.20 copay for drugs)

      3. Extra Help is only for prescription medications under Part D. QMB, SLMB, or QI Programs are the ones that help with the premium for Part B. If you’re trying to get help paying your Part B premium, you would need to enroll in one of these.

      4. The page is linked in my previous comment. It goes over each program in detail.

  2. Hi, Lindsay, In addition to a premium for my medicare supplemental policy, I also pay a second premium for drug coverage. Is that also deductible if I am self-employed? Thanks.

  3. Hi Lindsay,
    I have Medicare Supplement Insurance under Plan-F. Though you have replied to Peggy that such premium is deductible. However I would request you to please advise where can I enter this amount in my 1040-SR. I claim standard deduction in 2020. But bought Medicare Plan-F in January 2021.

    Thanks

    1. Hi Jack! According to TaxAct, 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 and you also report the premium payments or reimbursements as wages on Form 1040 or 1040-SR, line 1.

    1. Hi Rich! Thank you so much! So happy to hear you found the information useful and easy to read!

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