Health insurance premiums can slowly eat into your hard-earned money. You have to keep your policy, but it’s natural to wonder whether there’s a way to write off some of it. In some cases, residents of Rochester, MN, may be able to reduce their overall tax liability.

How Do You Pay the Premiums?

How you pay matters when it comes to determining whether your premiums count as a tax deduction. Most people with an employer-sponsored plan whose premiums are taken out of their paychecks typically can’t deduct those costs on their federal taxes, since that money is usually already deducted pre-tax.

On the other hand, if you pay your premium directly to a company like SafeChoice Insurance Agency using after-tax income, you may be able to claim that cost as part of an itemized medical expense deduction, provided your total qualifying medical expenses exceed 7.5% of your adjusted gross income.

Self-Employed Individuals

Self-employed individuals have access to a more favorable deduction. In most cases, they can deduct 100% of health insurance premiums paid for themselves, their spouse, and their dependents, without needing to itemize. This deduction can also apply to other qualifying healthcare costs, like dental or vision premiums, though separate out-of-pocket expenses like glasses or routine visits generally fall under the itemized deduction instead.

That said, this deduction can’t exceed your net profit from self-employment for the year. If your business operated at a loss, you generally wouldn’t be able to claim it. Tax rules can shift from year to year, so it’s worth discussing your specific situation with a professional accountant to make sure you’re capturing every deduction available to you.

At SafeChoice Insurance Agency, we understand that you want to keep as much of your money as possible. We’ll work with you to find a plan that fits your needs, and we can also help you track your expenses so you’re ready come tax time. Contact us today. We’re currently serving the Rochester, MN, area.

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