Dear Frank,
I’m a recently self-employed freelance designer who buys her own health insurance, and I have some tax-related questions. Are my monthly plan premiums deductible? What about other medical expenses?
Thank you for your help!
Itemized in Ohio
Hello Itemized,
You may be eligible to deduct your health insurance premiums if you are self-employed and have a net profit for the year—you can’t deduct more than you’ve earned.[1] According to the IRS, you should keep the following in mind[2]:
This is an adjustment to your income, rather than an itemized deduction, for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy covering medical care, for yourself, your spouse, and dependents. In addition, you may be eligible for this deduction for your child who is under the age of 27 at the end of 2016 even if the child wasn’t your dependent. See Chapter 6 of Publication 535 for eligibility information. If you don’t claim 100% of your paid premiums, you can include the remainder with your other medical expenses as an itemized deduction on Form 1040, Schedule A (PDF).
As for your second question, by law, if you itemize your deductions on Form 1040, Schedule A, you can deduct the amount of your total medical expenses that[3]:
- Exceed 10 percent of your adjusted gross income
- Or 7.5 percent of your AGI if you our your spouse is 65 or older
The IRS defines medical care expenses as “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.”[4]
Examples of tax-deductible medical expenses include payments for:
- Services from doctors, dentists, surgeons, chiropractors, psychologists, and nontraditional practitioners
- Acupuncture treatment or inpatient treatment at a center for alcohol or drug addiction, for participation in a smoking-cessation program and for drugs to alleviate nicotine withdrawal that require a prescription
- Insulin and drugs that require a prescription
- False teeth, reading or prescription eyeglasses or contact lenses, hearing aids, crutches, wheelchairs, and for a guidedog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities
- Click here to read more at IRS.gov
The IRS offers a tool to help you determine which of your medical and dental expenses may be deductible. See “Can I Deduct My Medical and Dental Expenses?” at IRS.gov to get started.
I hope these answers offer clarity as you complete your taxes. When in doubt, you may want to work with a tax professional who can assist you with specifics and answer additional questions.
Sincerely,
Frank
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