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.
Is Medicare Supplemental Insurance Tax Deductible
When it comes to Medicare, the principal question is- “is Medicare Supplemental insurance tax deductible?” This article will shed some light for you by answering the most frequently asked questions on the subject of Medicare tax deductions.
Is Medigap Tax Deductible
Most insurance premiums qualify for Form 1040’s Schedule A deductions but only over a certain threshold, including some Medicare premiums. There are four major categories of tax deductions namely:
- Business Deductions. Small business owners are required to incorporate their business earnings when they file their personal tax returns. As a sole proprietor, you will do this by a separate calculation of net profit or loss where you will report all income and deductions.
- Standard 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 are 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 since they are not 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 insurance 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.
More specifically, Medicare Part B (medical services), Medicare Prescription Drug Plans (Part D), and Medigap supplemental premiums are subject to tax deductions. Medicare 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 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.
In addition to that, only 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 are 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
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. 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. .
Are Medicare Part B Premiums Tax Deductible
Yes. To be more specific, Medicare beneficiaries should count the following as allowable tax deductions:
- Medigap premiums
- Medicare Part B & Part D premiums
- Medicare private health insurance premiums
- Coinsurance and co-payments for Medicare 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
- Medicare Part B or Part D penalties on late premiums
- Payment for medical payments made by an insurance company or any other source
Can 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. Call our helpline for more information if you need clarification on the question – “is Medicare supplemental insurance tax deductible?”
Contact a Licensed Medicare Agent
If you have any additional questions regarding Medicare or Medicare Supplements, please contact our office with the number provided above to be connected to a licensed agent located in your state. You can also read our frequently asked questions. If you need to enroll or a supplement plan, please fill out our compare rates form here!