Did you know that making a commitment to your health and future can reap tax benefits today? There are many tax deductions and credits that can be applied to your tax returns related to healthcare costs you incur, or funds you save from spending today to support you in your retirement. Just a few of these deductions are described below.

Medical and Health-related Tax Savings

Health insurance is 100% deductible--for business owners and the self employed. Just where on your tax return you report health insurance premiums and costs may vary, but it
is a definite source of tax savings. If you are self-employed, you can report the deduction on your personal taxes.

If you are a business owner, the health insurance coverage you provide for employees can be deducted from your business taxes, so as long as the total cost is not more than your net income. Your own insurance premiums are then reported on your personal income tax return.

Unfortunately, if you are a salaried employee who receives healthcare coverage as part of a benefits package, you are not eligible for any health insurance premium deductions; your employer is taking the deduction for you. But, if your employer does not provide insurance coverage, and you obtain private insurance, then it becomes a deduction on your own taxes.

Evenif you cannot claim health insurance premium deductions, there may still be health-related expenses that you as well as the self-employed and business owners can take advantage of for tax savings. Keep in mind that ALL health-related expenses can be deductible (within justifiable reason), so even if you are aware of the deduction and its potential limitations, it may still be helpful at tax time.

Much like health insurance premiums, there are two ways you can claim the medical/health expense deduction if you are self-employed or a business owner. If you are claiming the deduction as a business expense keep in mind that it needs to:

• be necessary for you to perform the work associated with your business
• the equipment, goods, services you are claiming as an expense are really only usable in the context of your business
• cannot be deducted in another area of your tax return(s)

The traditionally employed, self-employed and business owner can also claim health and medical expenses against their personal taxes so as long as it is more than 7.5% of your adjusted gross income. This does include the health insurance premiums described earlier. 

It also includes: any personal co-pays or co-insurance payments; eyewear, eyeglasses, or any corrective lenses; dental work not otherwise covered by insurance, chiropractic and holistic health expenses; hearing aids; prosthetics; walking aids or medical equipment; and virtually anything related to your health/medical treatment you have to pay for yourself. Even travel to and from doctor and specialist visits is tax deductible.

By making your health and well-being a priority, you can also minimize your tax payments. To see how prioritizing your retirement and future savings can offer more tax benefits, see “Your Health and Future Can Lower your Taxes (part II)”.

You should always consult a tax professional for more details about the tax deductions and tax savings strategies you can take advantage of personally or in business. After all, professional services are also tax deductible; see “Equipment, Expenses, and Professionals for Hire: More Small Business Tax Savings” for more tax-reducing deductions that may also work if you are an employee.

References

Carol and Richard Eustice. Deducting Arthritis on Your Income Taxes

Dianne Molving. Credits and Deductions Save You Tax Dollars

Untitled. Roy Lewis