Health insurance is expensive, but several tax breaks can help you pay your premiums and deduct your health care expenses. The new tax laws in 2021 expanded these benefits even further, which can be particularly helpful to people who have lost their jobs or bought their own health insurance coverage. You may be able to receive additional breaks when filing your 2021 income-tax return.
What Are Health Insurance Premiums?
Whether you have health insurance through your employer or on your own, or even if you’re covered by Medicare, you usually have to pay monthly premiums for your coverage. But your premiums may be tax-deductible, or you may be able to take other tax breaks that can help reduce your costs and stretch your health care dollars. Here’s how to figure out whether you are eligible for these tax benefits and what you need to do to get them.
Tax-Deductible Premiums for the Self-Employed
Your health insurance premiums can be tax-deductible if you have income from self-employment and you are not eligible to participate in a health plan offered by an employer (or your spouse’s employer). Your Medicare premiums may also be tax-deductible if you’re self-employed, says Morris Armstrong, an enrolled agent in Cheshire, Connecticut. “That is something people do not always realize,” he says.
You don’t have to itemize to be eligible – you take the deduction on Schedule 1 of Form 1040. The deduction is limited to the net profit from self-employment income you reported on Schedule C, says Jina Etienne, a certified public accountant in Silver Springs, Maryland.
Even if you had employer-sponsored health insurance for the first few months of the year, then lost your job and started doing some freelance work, you may be able to deduct some of the premiums you paid for the month