A recent survey found that 91% of participants were unaware that Medicare premiums could be tax-deductible. According to Mark Seid, a CPA and instructor at Western CPE, premiums for all Medicare Parts (A, B, D, Medicare Advantage, and Medigap) can be tax-deductible. However, there are specific rules regarding who is paying the premiums, who is covered, and where the deduction is allowed. In order to benefit from deducting Medicare premiums, individuals must have itemized medical expenses that exceed 7.5% of their adjusted gross income (AGI) for the year. Common out-of-pocket health expenses that may qualify for deductions include visits to healthcare practitioners, hospital care, treatment programs, prescription drugs, eyeglasses, hearing aids, and transportation for medical care.
Self-employed individuals have different options when it comes to deducting Medicare premiums. They can claim the premiums as an above-the-line deduction, and the deduction is limited to their net earnings from self-employment. Partners and certain S-corporation shareholders can also have their businesses reimburse them for Medicare premiums, as long as specific reporting rules are met. Additionally, those who had a Health Savings Account (HSA) before enrolling in Medicare can use the funds from their HSA to pay for Medicare premiums, as these contributions are tax-deductible and distributions for qualified medical expenses, including Medicare premiums, are not taxable.
In summary, many people are unaware that Medicare premiums can be tax-deductible. The eligibility for deducting these premiums depends on various factors such as the individual’s filing status, their itemized medical expenses, and their adjusted gross income. Self-employed individuals and certain business owners have additional options for deducting Medicare premiums. Furthermore, individuals who had a Health Savings Account prior to enrolling in Medicare can use those tax-free funds to pay for Medicare premiums. Understanding the rules and options surrounding the tax deduction for Medicare premiums can help individuals save money on healthcare costs.