2013 is a good year to familiarize yourself with new tax provisions in light of recent healthcare reforms. Whether you are an individual with private insurance, insured through your employer or retired with Medicare, there are federal income tax credits and deductions to help you reduce the costs associated with health expenses.
Many people tend to pass up on available tax breaks which are specifically designed to help consumers make their health insurance more affordable. If you are self-employed, run a small business, caring for aging parents or have high medical expenses, you could benefit from learning more about the follow ways to lower your tax bill and health insurance costs. Consult with your financial planner or insurance agent to ensure you are choosing the right options to make your health insurance more affordable.
Itemize Your Qualified Medical Expenses
Healthcare reforms will raise the threshold for deductible medical expenses on 2013 taxes, so if your qualified medical expenses exceeded 7.5% of your adjusted-gross income in 2012, you can deduct those costs on an itemized tax for form (such as a 1040 Schedule A). You may be able to receive a refund for monthly premiums, some Medicare premiums, co-pays, deductibles and costs not covered by insurance. For more information about qualified tax deductible medical expenses for 2012, see IRS Publication 502.
Get Tax Credits for Providing Employees with Health Insurance
If you are a small business owner offering health insurance coverage to your employees, don’t forget that you are eligible for federal tax credits. Employers paying half of the health insurance premiums on fewer than 25 employees earning less than $50,000 annually may qualify for a special tax credit up to 35% of that contribution. Next year that credit is being boosted to 50% as an incentive for small businesses to help their employees afford coverage.
Deduct Health Insurance Premiums as Self-Employed Business Expense
If you were self-employed in 2012, you may be able to deduct your health insurance premiums for you or your dependants as an ‘above the line’ business expense without having to itemize your deductions. Unfortunately, if you self-employed part-time and were also eligible for any employer-sponsored health coverage, you cannot take this dedcution
Deduct Medicare Premiums and Qualified Home Improvements
If you are retired, in addition to qualified medical expenses above your adjust-income threshold, you may also be able to deduct the Medicare premiums used to pay for Medicare Part B, Part D (Prescription Drugs) and some Medicare supplementals. You may also be eligible for itemized deductions on medical equipment or qualified home improvements to make you home handicapped-accessible.
Breaks for Those who Care for an Aging Parent
If you are caring for or paying for more than half of the nursing care expenses of an elderly parent, you may qualify for several opportunities to lower your tax bills. You might be able to claim your parent as a dependent – offering several tax exemptions in addition to itemized deductions for qualified medical expenses.
Leverage a Qualified Health Savings Account (HSA)
You have until April 2013 to increase your deduction for contributions to a qualified HSA. Health Savings Accounts pair a tax-exempt savings account with high-deductible health insurance plans. Lower your taxable income by making pre-tax contributions to your HSA and deduct your contributions without having to itemize your qualified or unqualified medical expenses. For more information about contribution restrictions and qualified deductions, see IRS Publication 969.
Plan for the Future of Health Insurance
Under the new federal health insurance provisions, everyone will be required to show some form of health insurance by 2014 or earn a tax penalty. Individuals under a certain income will qualify for subsidies while those with expensive ‘cadillac’ insurance plans may be hit with excise taxes. It is now more important than ever to review your health insurance options, tax status and budget plans with your insurance agents and trusted financial advisers.