Tax Bill Medicare: Americans who are 65 and older automatically qualify for basic Medicare insurance. They may need to pay additional premiums to get the coverage they desire. Premiums can be expensive, especially if you’re married and both you and your spouse are paying them. However, if you qualify, they may help lower your tax bill.
Premium tax deductions
You can combine premiums with other qualifying health care amounts. This is to claim an itemized deduction for medical expenses on your individual tax return. This includes rates for Medigap insurance and Medicare Advantage plans. People buy Medigap policies becauseMedicare Parts A and B don’t cover all their health care expenses. Medigap is private supplemental insurance that’s intended to cover some or all gaps. Coverage gaps include: co-payments, co-insurance, deductibles, and other costs.
Fewer people now itemize
For 2019, you can deduct medical expenses only if you itemize deductions. Also only to the extent that total qualifying expenses exceeded 10% of your adjusted gross income (AGI). For the 2018 tax year, it was 7.5%. This makes qualifying for a medical expense deduction difficult.
The Tax Cuts and Jobs Act nearly doubled the standard deduction amounts for 2018 through 2025. In 2019, the standard deductions are $12,200 for single filers, $24,400 for married joint-filing couples and $18,350 for heads of households. This is causing fewer individuals to claim itemized deductions.
If you have significant medical expenses (including Medicare premiums), you may itemize and collect some tax savings.
An important thing to know is self-employed people and shareholder-employees of S-Corporations can generally claim an above-the-line deduction for their health insurance premiums. They don’t need to itemize to get the tax savings from their premiums.
Other deductible medical expenses
You can deduct a variety of medical expenses in addition to Medicare premiums. This includes ambulance services, dental treatment, dentures, eyeglasses and contacts, hospital services, lab tests, qualified long-term care services, prescription medicines and others.
Many items that Medicare doesn’t cover can be written off for tax purposes, if you qualify. You can also deduct transportation expenses to get to medical appointments. If going by car, you can deduct a flat 20-cents-per-mile rate for 2019. Or you can keep track of your actual out-of-pocket expenses for gas, oil and repairs.
Need more information?
If you have additional questions about Tax Bill Medicare coverage options or claiming medical expense deductions on your personal tax return, please contact us. Your advisor can help determine the optimal overall tax-planning strategy based on your personal circumstances.