Each year, the federal tax law allows American citizens to deduct some personal expenses from their taxable income.
However, the Internal Revenue Code is super specific on what expenses can be deducted and who can claim these deductions. So, not all expenses incurred on a regular basis can be deducted.
These federal income deductions decrease the amount of income that is subject to federal income tax and can really lessen the tax burden during the tax season.
Therefore, many American citizens — including Medicare beneficiaries, are always on the lookout for appropriate tax deductions.
Are Medicare Premiums Tax-Deductible
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.
Medicare Premiums & Taxable Deductions
This article will shed some light for you by answering the most frequently asked questions on the subject of Medicare tax deductions.
There are four major categories of tax deductions:
- Business Deductions
- Standard Deductions
- Above the Line Deductions
- Below the Line Deductions
Small business owners are required to incorporate their business earnings when they file their personal tax returns. As a sole proprietor, you’ll do this by a separate calculation of net profit or loss where you’ll report all income and deductions.
Standard deductions are intended to allow taxpayers to claim the standard deduction, even if they don’t itemize deductible expenses.
The government comes up with the standard deductible figure each year, but this figure can increase depending on your other individual deductions you’re allowed to make.
Above The Line Deductions
Before you arrive at the final taxable income amount, personal income tax returns necessitate the calculation of Adjusted Gross Income (AGI). The deductions made in the calculation of the AGI are less restrictive. This is due to not being related to the AGI in any way.
For instance, alimony payments made to a former spouse can be deducted regardless of the AGI. Similarly, a work-related relocation can allow you to deduct the total moving expenses.
Below The Line Deductions
Below the line deductions are restricted depending on your AGI. These deductions are related to the expenses you itemize on your Schedule A attachment when filing your income tax returns.
Your Medicare Supplement deductions fall into this category along with other dental, medical, and work-related miscellaneous expenses. So if the question “is Medigap tax-deductible?” is still lingering in your mind, the answer is yes.
Medicare Supplement Premiums are Tax Deductible
Part A is usually not deductible, however, if you pay monthly Part A premiums, are not covered under social security, and you didn’t pay Medicare taxes while you were working, you may be able to deduct Part A premiums.
Are All Medicare Expenses Applicable to Deductions
The answer is no. Not all Medicare Supplement insurance expenses apply to tax deductions. Even though the cost of Medigap premiums is subject to tax deductions, not all expenses are deductible.
All Medigap expenses are considered a medical expenditure and follow the guidelines for this type of deduction. Medical expenses are only deductible if and only if they are itemized by the taxpayer in his/her personal income tax returns.
The amount that exceeds 7.5 percent of the Medicare beneficiary’s AGI is subject to tax deductions. Most of the Medicare beneficiaries are 65 years and older, hence retirees.
Due to this fact, their AGIs are generally lower and are likely to benefit from this tax deduction.
If you’re younger than 65, the medical expense deductions have to surpass 10 percent of your AGI to be applicable.
What Are The Allowable Tax Deductions For Medicare Beneficiaries
In general, any costs associated with the treatment or diagnosis of a medical condition or an injury is allowed. This includes preventative care and the cost of any medical equipment or supplies.
The IRS list of deductible medical expenses is long, the list includes some items you typically wouldn’t expect. The cost of altering your home to install medical equipment and the cost of transportation from your home to a medical facility may be included.
Are Medicare Part B Premiums Tax-Deductible
Yes. To be more specific, Medicare beneficiaries should count the following as allowable tax deductions:
- Medigap premiums
- Part B & Part D premiums
- Medicare private health insurance premiums
- Coinsurance and co-payments for Part A, Part B, and Part D services
- Part D donut-hole out-of-pocket costs
- The cost of long-term care insurance, but this is subject to various limitations
- The cost of nursing home care, dental treatment, contact lenses, medically necessary eyeglasses hearing aids, routine check-ups and other out-of-pocket expenses that Medicare doesn’t cover
Here are some of the cost that cannot be included in the tax deductions:
- Supplements, vitamins, and non-prescription drugs unless they are recommended by a doctor to treat a specific ailment
- Prescription drugs purchased out of the country
- Part B or Part D penalties on late premiums
- Payment for medical payments made by an insurance company or any other source
Can Medicare Deductions be Combined and Claimed Jointly as a Couple
Despite the fact that Medicare Supplement policies can’t be a joint plan, couples can file their returns jointly and combine their deducted premiums. For this to happen, each partner must have their individual policies since they don’t combine coverage.
Is Medicare Supplement Plan G Tax-Deductible
Yes, Plan G is deductible as a medical expense on Schedule A for Form 1040. You can only deduct the amount that exceeds a certain percentage of your adjusted gross income.
Contact a Licensed Medicare Agent
If you have any additional questions regarding Medicare, please contact our office to be connected to a licensed agent located in your state. If you’re looking to compare Medigap rates online, you can do so here.