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Health Insurance Expenses May Mean More Deductions Posted: December 31st, 2009

By Sanford Ellowitz

Sanford Ellowitz is a New York State licensed insurance agent. He is also a Certified Financial Planner and a Certified Employee Benefit Specialist. He has over 25 years experience in the insurance and financial services industries.

If you recently moved into a lower income tax bracket, you may be able to deduct more of your medical expenses.

Health Insurance Premiums May be Tax Deductible

You may be able to save on your taxes if your medical expenses, which include the premiums your pay for health insurance, exceed 7.5% of your Adjusted Gross Income (AGI).

In most years, most tax payers don't reach this threshold because medical expenses are typically less than 7.5% of AGI, and employers typically pay the majority of health insurance premiums.

However, if your income dropped when you were laid off or retired, your medical expenses may now more easily reach this deduction level.

Keep Track of Eligible Medical Expenses

In order to claim this deduction, you have to itemize all eligible expenses. Keep track of all of your family's health related expenditures, such as insurance deductibles, out of pocket co-pays, eyeglasses and dental bills. Incidentals, such as contact lens fluid, also count. You may find the amount you save worth the effort.

As long as the health care expenses are paid for with your own, after tax dollars you can use them as a deduction.

If you're paying for your health insurance, as well as health insurance for your dependents, medical insurance premiums are included in the expenses that go towards meeting the minimum 7.5% of your AGI.

The Self-employed Can Benefit from a Deduction

Check with your accountant regarding the exact IRS rules and regulations, but if you're now self-employed and your business makes a profit, you can generally deduct the entire cost of health insurance for yourself and your dependents.

COBRA Subsidy to End Soon

Under the provisions of COBRA, employees who lose their health insurance coverage because of a loss of employment, are able to continue their plans at group rates. Plans covered under COBRA generally have substantial benefits, so their premiums are high.
To make coverage more affordable, the federal government has been subsidizing the cost of COBRA for 9 months.

If your COBRA subsidy is now approaching the 9 month limit and you are now facing a steep increase in premiums, you may want to go online to search for health insurance quotes for a cheap health insurance plan--even one with lower benefits.

Keep in mind that some of the cost of your medical insurance premiums may be offset if you can deduct them.

Sanford Ellowitz