With the passing of the Affordable Care Act, and some of the challenges that have been issued and defeated in courts around the country, many are wondering where they should go to buy their health insurance and what will be different once they get it. With so many offerings made available, and changes beyond the comprehension of the average consumer there are things to consider when debating a personal healthcare plan or opting for the coverage from their employers.
Since the Affordable Care Act depends heavily on the decisions of the governor of each state, exchanges will vary depending on where you live. When looking at premiums that will best benefit you, consider the following factors: your state of residency, age, income, number of dependents you would file in your upcoming tax returns, your spouse or lack thereof, and lifestyle habits that may be a benefit or a risk to your overall health. Depending on your profile, your status as a policyholder can shift dramatically in coverage and premium you’ll be held to. Once that is determined, it is your responsibility to determine whether or not the coverage you are awarded meets the standards of the Affordable Care Act in order avoid any unnecessary penalties.
One of the questions policyholders explore after getting coverage concerns the impact their decision will have on their next tax filings. It would stand to reason that an expense made with capital throughout the year, prior to filing, will be eligible for tax deductions. However, can your health care premiums be used to gain some benefit from taxes? It may, but there are conditions to consider.
Healthcare Through Your Employer
If your healthcare premium comes through an employer, but your insurance is arranged in a way where you pay your premium post-taxes, you have the option to deduct medical expenses accrued through Schedule A Itemized Deductions. There are limits to this, however. The health premiums you pay and all other medical costs combined must exceed 7.5% of your annual gross income, and it is the costs above 7.5% that are deducted. With this being the case, many might prefer to pay for their insurance with pre-tax dollars as to avoid an accumulation of cost at the end of the year.
Healthcare While Being Self-Employed
For those who are self-employed, there are options to apply for tax deductions for the premiums you use. For some this may include the premiums for all members of your family, not just those who qualify as dependents. Rather than applying this deduction as though they were employed and given insurance through a third party, these filers will have to make an adjustment to their income on their 1040 form. It can also be listed as a claim irrespective of other itemized deductions they are claiming. This will lower the AGI of a filer, relieving pressure from other deductions that may or may not be accepted in their Schedule A
Healthcare for Small Businesses
Last year small businesses were given the opportunity to seek tax breaks if they sought coverage for employees through the government’s Small Business Health Options Program–a marketplace of healthcare providers geared towards businesses of a certain size. Employers with fifty full-time employees or fewer may receive tax credits when their insurance is purchased through SHOP. For every year this tax incentive is available, there is a duration. Shop accordingly.
Regardless of a filer’s current employment position, there are incentives and deductions available for health insurance holders. This hinges on variables of the policyholder and employer, and some depend on meeting time windows. Speaking with a tax adjuster directly can ensure you meet the right deadlines and take advantage of eligible deductions.
Brennen Kliffmueller is a blogger who discusses a wide range of financial and insurance topics in order to help readers get the coverage they need. For those shopping around for insurance he highly recommends paying a visit to insuranceland.org. You can learn more about Brennen onGoogle+.