The cost of health care continues to rise, and many find themselves falling behind as a result. You can’t stop health care costs from rising. It doesn’t seem to matter what legislation is enacted, or what steps are taken. However, there are ways to recoup some of your expenses. In some cases, you can deduct your health care costs.
If you are looking to offset some of the cost of your health care expenses, here are some ways that you can receive a tax benefit:
Self-Employed: Deduct Health Insurance Premiums
If you are self-employed, owning a business, you can deduct your health insurance premiums. This can be done as part of the process of figuring your net profits for your business, and there is space for it on the front of Form 1040. Remember, though, that you are already receiving a benefit if you receive health insurance through your employer; the premiums are usually paid with pre-tax dollars.
If you provide health care benefits for employees of your business, there are tax benefits for your business. Make sure you understand what is available to you so that you are enjoying the greatest possible tax efficiency when you fill out your tax forms.
Out of Pocket Medical and Dental Expenses
If you spend a lot of money out of pocket on medical and dental expenses, you might be able to deduct some of your costs. If your costs amount to more than 7.5% of your adjusted gross income (the threshold will rise to 10% as the recent health care reform law takes full effect), you can deduct the expenses beyond that amount. This includes fees paid to doctors and dentists, as well as money paid for prescriptions and other treatments. However, these costs must not be reimbursed by an employer or by insurance.
Health Savings Account Contributions
Another option is to open a health savings account (HSA). If you have a high deductible health plan, you can open a HSA and set money aside. Your contributions, up to a certain amount adjusted yearly for inflation, are tax deductible. You can put money into your HSA, and then use the funds to pay for health care costs, including doctor visits (including co-pays), prescriptions, hospital treatments and more. The money rolls over year to year, so it grows if you don’t use it. Judiciously used, a HSA can help you make almost all of your health care costs tax deductible.
Plus, you can make previous contributions to your HSA without too much trouble. Just realize that you can’t claim your deduction for more than one tax year. You have to decide whether it’s a current year contribution or a previous year contribution.
Bottom Line
While a deduction won’t result in a dollar for dollar reduction in what you owe for taxes, you can still benefit. Keep track of your medical expenses, and save your receipts. You might just be able to improve your situation, and offset some of the rising costs of health care with the help of tax deductions for what you spend on health care.
