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Are Medicare Premiums Tax-Deductible?

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Summary: If you itemize deductions, you may be able to deduct healthcare costs such as Medicare premiums.

If you’re on a fixed income, every dollar counts—including money spent on health care and Medicare premiums. According to a 2019 report by Fidelity, about 15% of a retiree’s annual expenses could go to healthcare-related expenses including Medicare premiums, deductibles, and copayments.

If you’re on Medicare and looking for ways to minimize your tax burden, here’s what you need to know about Medicare premiums and income tax.

What Medicare premiums do I have to pay?

There are four parts to the Medicare program:

  • Part A, which is your inpatient hospital, hospice, and skilled nursing facility insurance
  • Part B, which covers doctor visits, diagnostic tests, durable medical equipment, and most outpatient services
  • Part C, which is the Medicare Advantage program (you choose between the Original Medicare or Medicare Advantage track)
  • Part D, which is Medicare’s prescription drug program

If you sign up for Original Medicare and want protection against out-of-pocket costs, you may also have Medicare premiums for a Medicare Supplement insurance plan.

Medicare premiums for Part A are based on your work history; most people qualify for premium-free Part A. Everyone generally pays the base Part B premium, even if you enroll in a Medicare Advantage plan, although some low-income individuals qualify for additional help with Medicare premiums for Part B. Those with higher incomes may pay a high-income adjustment along with the standard Part B Medicare premiums.

If you enroll in Part C, or Medicare Advantage, plan, you pay your Part B Medicare premium plus any additional premium charged by your plan. (Some Medicare Advantage plans have premiums as low as $0.)

Medicare Part D Prescription Drug Plans are technically optional; if you choose to enroll in one, you’ll typically pay your insurer a separate premium. However, if you get your Part D prescription drug coverage through your Medicare Advantage plan, you only pay your insurance company one premium for both your Medicare benefits and your prescription drug plan. Some people with higher incomes may also pay a premium adjustment to Medicare for their Part D prescription drug coverage.

Are my Medicare premiums and out-of-pocket costs tax-deductible?

Under the U.S. tax code, you may be able to deduct health care expenses beyond a certain percentage of your income if you itemize deductions. As of 2019, out-of-pocket medical expenses that exceed 10 percent of your gross income could be tax-deductible.

The tax code states the following expenses may count toward the itemized health care deduction:

  • Health insurance premiums, such as Medicare premiums, paid with after-tax income
  • Premiums for a qualified long-term care insurance

You may also itemize:

  • hospital, hospice, or skilled nursing care
  • outpatient services including doctor visits, ambulance rides, and diagnostic tests
  • prescription medications
  • dental and vision care
  • preventive care
  • home modifications necessary to keep you safe

Keep in mind that only the expenses you pay out-of-pocket count toward the itemized deductions. In other words, if you have a $20,000 hospital bill, and Medicare pays all but $1,500 of it, only the $1,500 you pay for your care can be itemized on your return, not the entire $20,000 bill.

To look for Medicare plan in your area, enter your zip code on this page.

The information in this article isn’t a substitute for advice from a tax professional, so be sure to talk to your tax preparer about your health care deductions. It’s always a good idea to keep receipts for all health care expenses, including Medicare premiums, copayments, and coinsurance amounts to help you and your tax professional when it’s time to file your taxes.

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