If you’re nearing the age for Medicare eligibility, there are some things you should know about Medicare. One of those things is whether Medicare premiums are tax-deductible. You want to ensure you file your taxes correctly, but you also want to be certain you take advantage of every deduction available to you. Let’s break down what Medicare tax deductions you can take, what expenses aren’t deductible and other things you should consider for your taxes.
A financial advisor can help you create a financial plan to pay for your medical expenses in retirement.
Can You Deduct Medicare Premiums?
Yes, Medicare premiums are tax deductible as a medical expense as long as you meet two requirements. First,you must itemize your deductions on your tax return to deduct them from your taxable income. Second, only medical expenses that exceed 7.5% of youradjusted gross income (AGI)are deductible.
Let’s break that down a bit. By itemizing your deductions, you’re forgoing the standard deduction in favor of listing your deductible expenses. If you have enough deductible expenses, this can improve your standing at tax time. To do this, you’ll need to keep receipts and records to prove the expenses.
If you have an AGI of $60,000, for example, you’ll be able to deduct any medical expenses that exceed $4,500. That first $4,500 isn’t deductible. So, if you have $7,500 in medical expenses — including Medicare premiums — only $3,000 is deductible.
Are Medicare Premiums Tax Deductible If You’re Self-Employed?
Yes, they are. If you’re self-employed, you may not have to meet the mark of having 7.5% of your AGI go to medical expenses. That includes whether you’re fully employed, or if you’re retired and doing some consulting or freelancing on the side.
To qualify for the deduction, neither you nor your spouse may be eligible for health insurance through an employer. This deduction includes any premiums you pay with Medicare parts A, B, C and D, as well as Medicare Advantage and Medigap premiums. You claim this deduction on Schedule 1 when filing Form 1040.
What Other Medicare Expenses Are Tax Deductible?
Even if you receive Medicare, you may be facing a variety of medical expenses that Medicare doesn’t cover. Along with Medicare premiums, some of these medical expenses are tax deductible. Costs like long-term care, transportation for appointments and home improvement changes you’ve had to make due to a disability can be tax-deductible. Here are some other out-of-pocket expenses that you can deduct:
- Dental care:Co-pays, extractions, fillings and any other dental expenses can be deductible.
- Ear and eye care:Glasses, contacts, hearing aids, eye and ear exams and more can be deductible.
- Medical equipment:Walkers, wheelchairs, braces and any other sort of equipment you need can be tax deductible.
- Mental health:Psychiatric care, psychoanalysis and therapy for medical treatment can be a tax-deductible medical expense.
- Chiropractic services, vasectomies and more:The IRS’ list of tax-deductible medical expenses is fairly comprehensive. If you think the expense qualifies, do some research.
Remember that these expenses combined will have to make up over 7.5% of your AGI to be deductible.
Are There Medicare Expenses You Can’t Deduct?
While Medicare premiums and many other medical expenses are tax deductible, the IRS has a short list of medical expenses that don’t qualify for the deduction. These include:
- Cosmetic surgery
- Hair transplants
- Electrolysis, or hair removal
- Nonprescription drugs, such as supplements and vitamins
- Drugs bought internationally
- Personal hygienic items
- Teeth whitening
- Gym or health club fees
- HSA contributions
Bottom Line
As you get older, the chances are that you’ll have more medical expenses. While this isn’t exactly great news, there is a small upside in that you can deduct medical expenses that exceed 7.5% of your AGI. That includes Medicare premiums, as well as many other common expenses. To make the most of your taxes, you need to itemize your deductions and present proof of the expenses in the form of receipts.
Tips for Getting the Best Tax Deduction
- Deductions are a complex part of the U.S. tax code. Depending on your profession, your lifestyle and how you file, you may be able to claim different deductions. A financial advisor can walk you through these deductions. Finding afinancialadvisor doesn’thaveto behard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When planning for your taxes, it helps to have an idea of what you’re in for. If you want to estimate how much you’ll pay in taxes, check out our income tax calculatorto see how federal and state taxes may impact you.
- If you’re eligible for Medicare, chances are you’re retired or hoping to retire soon.Ourretirement calculatorcan help you determine your estimated Social Security benefits, how much savings you need to retire and how much extra income you’ll need in retirement.
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FAQs
You can include all premiums paid for Medicare, including Part B, as a self-employed health insurance deduction. You may be asking yourself: “Can I deduct my Medicare Part B premiums from my taxes?” The answer is yes.
Can I write off Medicare premiums on my taxes? ›
Yes, Medicare premiums are tax deductible as a medical expense as long as you meet two requirements. First, you must itemize your deductions on your tax return to deduct them from your taxable income. Second, only medical expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible.
Do Medicare premiums reduce Social Security taxable income? ›
Medicare premium deductions are for your income taxes (federal, state, and local). They do not impact your self-employment taxes, which include taxes to fund the Medicare and Social Security programs.
Can Medicare premiums be considered self-employed health insurance? ›
If you're self-employed and receive Medicare, you may be able to deduct all your Medicare insurance premiums. The IRS has recently ruled that Medicare recipients who have self-employment income may deduct the premiums they pay for Medicare coverage, the same as the premiums for any other type of health insurance.
Can you deduct health insurance premiums without itemizing? ›
Health insurance premiums are deductible if you itemize your tax return. Whether you can deduct health insurance premiums from your tax return also depends on when and how you pay your premiums: If you pay for health insurance before taxes are taken out of your check, you can't deduct your health insurance premiums.
What is the extra standard deduction for seniors over 65? ›
How much is the additional standard deduction? For tax year 2023, the additional standard deduction amounts for taxpayers who are 65 and older or blind are: $1,850 for single or head of household.
At what age is Social Security no longer taxed? ›
Social Security tax FAQs
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
Does everyone pay $170 for Medicare? ›
If you don't buy Part A when you're first eligible for Medicare (usually when you turn 65), you might pay a penalty. Most people pay the standard Part B monthly premium amount ($174.70 in 2024). Social Security will tell you the exact amount you'll pay for Part B in 2024.
Does Medicare Part B premium count as income? ›
Part B premiums: Part B premiums are tax deductible if you meet the income rules. Part C premiums: You can deduct Part C premiums if you meet the income rules. Part D premiums: As with parts B and C, you can deduct your Part D premiums if you meet the income rules.
How do I get the $16728 Social Security bonus? ›
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
The net amount of Social Security benefits you receive is reported in Box 5 of your Social Security benefit statement (Form SSA-1099). According to the IRS, your benefits may be taxable if the total of your combined income is greater than the base amount for your filing status. Up to 85% of benefits can be taxed.
Can I deduct health insurance premiums if I am retired? ›
Medical and Dental Expenses
Fortunately, some of these expenses are deductible if you itemize your personal deductions. These include health insurance premiums (including Medicare premiums), long-term care insurance premiums, prescription drugs, nursing home care, and most other out-of-pocket healthcare expenses.
Is social security tax deductible? ›
Social security and Medicare hospital insurance taxes are not deductible when determining an employee's taxable income. However, a deduction is allowed for an amount equal to one-half of the combined self-employment social security and Medicare hospital insurance taxes that are imposed.
Why can't I deduct my health insurance premiums? ›
In order to deduct medical expenses, including health insurance, from your taxes, your total medical costs must exceed 7.5% of your adjusted gross income (AGI) — and you can only deduct the amount above that 7.5%.
How much of my health insurance premiums can I deduct? ›
Non-self-employed people who buy their own health insurance can possibly deduct their premiums, but only to the extent that their total medical costs exceed 7.5% of their income, and only if they itemize their deductions.
What are the IRS rules for deducting health insurance premiums? ›
How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 7.5% of your AGI.
Can I deduct supplemental health insurance premiums? ›
Supplemental health insurance premiums, like hospital indemnity insurance and critical illness insurance, are generally tax deductible, but only as a qualified medical expense.
What deductions reduce Medicare tax? ›
The W-2 Box 5 amount is taxable wages subject to Medicare taxes. This differs from your gross earnings because there are certain deductions that reduce your Medicare taxable wages, such as pretax medical/dental and vision insurance, and FSA Medical and Dependent Care.
