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 your adjusted 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 personal 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. In fact, 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:
