Healthcare is a major expense for most families. If your employer doesn’t cover insurance premiums or you have a high-deductible health plan, it may be especially tough. Luckily, some families may qualify for healthcare tax breaks. These are some of the most common ones to be aware of.
1. You may have to pay back premium tax credits
When your family is below a certain income, the Marketplace may offer discounted insurance. This discount is actually an advance tax credit. To prove you qualify, you have to reconcile the credit at tax time. If your income stays the same, there shouldn’t be a problem. But if you made more money than you estimated, you may have to pay back some, or all, of the tax credit.
It’s never a good idea to skip filing your tax return. The consequences are especially dire if your family relies on the advance tax credit to pay for insurance. If you don’t file, the Marketplace will find out, and won’t offer your family the same benefit for next year.
2. Self-employed folks get a tax break for insurance premiums
When you’re self-employed, you may have to foot the entire cost of your family’s health insurance. To ease the sting, the government offers a tax break. You can subtract your family’s insurance premiums from your taxable income. The government allows the same thing for qualified long-term care insurance policies too.
3. You can deduct contributions to your health savings account (HSA)
Often, high-deductible health plans mean paying more for healthcare out of pocket. One way to make it more affordable is by pairing your insurance with a health savings account (HSA). These accounts offer three different tax breaks. Contributions reduce your taxable income, the growth is tax-free, and taking money out for qualified expenses is penalty-free.
4. You could get a deduction for your healthcare expenses
If you spent a lot of money on healthcare, take the time to collect and tally each of your receipts. You may be able to deduct anything above 7.5 percent of your adjusted gross income. The problem is, if you don’t itemize deductions, it won’t actually save you money. Most people don’t itemize — especially since the Tax Cut and Jobs Act (TCJA) increased the standard deduction. But still, it’s worth looking into.
5. Ask for professional advice if you need it
Even without the recent TCJA changes, the tax code is a never-ending maze of confusing rules. No one expects you to be a tax expert. There is nothing wrong with asking for advice. Working with a qualified professional may ease your concerns. It may even save your family more money in the long run.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.