When is Insurance Tax Deductible?
by Efin Advisor | January 26, 2010
Insurance may not be the first place you look for a significant deduction on your federal income tax return this tax season, but it definitely shouldn’ t be your last.
The most common deduction for medical insurance often goes unnoticed by a large segment of the workforce. The premiums your employer pays under a group health insurance plan with pre-tax money are never included in your W-2 wages, and so are never taxed. That’s a deduction you may never have realized you were getting,
Self-employed persons can deduct health insurance premiums above-the-line. This deduction is available to independent contractors, and owners and partners running small businesses.
If you’re not self-employed, and you don’t work for a company that provides health insurance with a cafeteria plan, you may be out of luck. But there is a possible out. The Internal Revenue Service allows you to count health and dental insurance premiums as part of the 7.5% of your adjusted gross income that has to be spent on health care before any out-of-pocket medical expenses can be deducted.
Auto insurance might also be deductible, if you drive your car or truck for business purposes. Generally, the deduction for car and truck expenses is available for self-employed people who drive for business, or employees who use their own vehicle as a part of their job. Your daily commute to work is not tax-deductible, but there is a notable exception for people who have to travel extraordinary distances to get to their job site.
Homeowners insurance is definitely deductible for rental properties. If you have an office in your home, a percentage of your homeowners policy may be deductible.
Also remember that you cannot take a double tax benefit for an expense. So if you receive a reimbursement for property damage (which is a tax-free event), you’ll be able to deduct casualty losses only for any damage that remained unpaid by your insurance.
Whether you are a baby boomer or not, knowing what to claim is important especially since we are now learning news ways to save and new ways to make more money.
These are good tips that can help especially the work at home entrepreneur.
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The Health Savings Account is a revolutionary way to pay for medical costs using tax-free dollars. Perhaps the best way to reform health care is to create more innovation in the way people pay for it, including greater tax deduction.
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As more Americans bring more of their work home, including the creation of full-time home-based businesses, we can all appreciate that tax deduction. This includes a proportional share of utilities, rent or mortgage, insurance and more,
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I’d like to make the suggestion that the U.S. government offer a tax rebate for buying a GM car since the government is a major stakeholder, and so are all American tax payers. Other countries liberally subsidize their transportation industries. Why not let auto buyers breathe new life into Detroit as the center of next-century GM innovation? That’s a genuine incentive to buy American!
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