It’s everyone’s favorite time of year: Tax season. Do you know how to make the most of it?
According to eHealth, many consumers overlook credits and deductions built into the tax code designed to make medical care and health insurance more affordable. Consumers who had high medical expenditures in 2012, who were self-employed or owners of small businesses, or who cared for aging parents, should especially educate themselves on the opportunities to deduct a portion of their expenses from their federal income taxes.
Here are seven health and health insurance tax tips to consider when completing federal income taxes, courtesy of eHealth.
1. Itemize medical expenses while you can.
Not everyone has medical expenses high enough to deduct them on their federal tax returns, but even fewer will be able to do so next year. 2012 is the last year you’ll be able to itemize and deduct medical expenses in excess of 7.5 percent of your adjusted gross income. As a result of health reform, that threshold is being raised to 10 percent for the 2013 tax year. So, if you itemize on your federal tax return, do the math. Qualifying medical expenses in excess of 7.5 percent of your adjusted gross income for 2012 may be itemized.
You can refer to IRS Publication 502 for more information about qualifying medical expenses, but these may include monthly premiums you pay for coverage (including some Medicare premiums), copayments, deductibles, dental expenses and costs for some services not covered by your insurance plan. You may even deduct mileage accrued while driving to and from regular appointments. This deduction isn’t for everyone, but if you (or one of your dependents) were seriously ill or hospitalized last year, you may qualify.
2. Consider expenses for the care for an aging parent.
If your elderly parent earned less than $3,800 in 2012 (excluding Social Security in most cases) and you provided more than half of his or her financial support, you may be able to claim your parent as a dependent. This earns you an additional dependent exemption, even if your parent doesn’t live with you. And if you’ve paid for the medical or nursing care of a dependent parent, you also may be able to itemize your costs as qualified medical expenses.
3. Don’t forget about Medicare premiums and medical home improvements.
If you’re a retired senior, you may have an easier time meeting the 7.5 percent adjusted gross income threshold to deduct itemized medical expenses on your federal return. In addition to your out-of-pocket expenses for medical, dental or vision care, you also may be able to include capital expenses for the installation of home medical equipment or improvements of your property for wheelchair access. In addition, premiums taken from your Social Security check to pay for Medicare Part B may qualify as deductible, as well as premiums you paid for Medicare Part D (Prescription Drug) coverage or a Medicare Supplemental plan.
4. Look into deducting health insurance premiums as a business expense.