Affordable Care Act
Health Insurance Tax Tips
Published on March 11, 2016
Have you done your taxes yet? If not, make sure you take advantage of the credits and deductions built into the tax code that are designed to make medical care and health insurance more affordable.
Here’s a list of our top tax tips for the 2015 tax year. Work with a licensed tax professional to which of the following may apply to you.
Top 7 Tax Tips for the 2015 Tax Year from eHealth
- Look out for increased tax penalties for going uninsured.
If you were uninsured for more than two consecutive months during 2015, you may be subject to a tax penalty (officially known as a “shared responsibility payment”) on your federal return. For 2015, the penalty is either 2% of your taxable household income or $325 per adult ($162.50 per child), whichever is greater. That’s a significant increase from last year, but the penalty for the 2016 tax year will be even higher. If you don’t already have coverage today, look into your options now. Open enrollment is over, but people who have experienced qualifying life events can still get health insurance in 2016.
- Find out if you’ll need to repay your subsidies from 2015.
Did you receive government subsidies for your 2015 health insurance coverage? If so, be prepared to potentially pay back some of those dollars if you earned more than you had originally anticipated. Your eligibility for subsidies was initially based on your estimated income for the year. If you earned more than anticipated, you may be required to pay back some or all of the subsidies you received. On the other hand, if you earned less than expected, you may be due additional assistance, which could potentially decrease your taxes.
- Check the mail for your 1095 form
You may not have seen these forms before, but most health insurance consumers should expect one this year. The 1095 comes in a few variations (1095-A, 1095-B, 1095-C ), depending on whether you got your coverage through an employer or purchased it on your own. The form is official proof that you had health insurance meeting the Affordable Care Act’s coverage requirements. It also confirms how much subsidy assistance (if any) you have received in 2015. This information is necessary to help you complete your 2015 federal tax return.
- Be aware of medical expense deductions
Did you know that you can itemize and deduct qualifying medical expenses from your 2015 taxes? It’s true, but here’s the hitch: you can only deduct qualifying expenses that exceed 10% of your adjusted gross income. Refer to IRS Publication 502 for more information about qualifying medical expenses, but these may include monthly premiums you pay for coverage (including some Medicare premiums), copayments, deductibles, dental expenses, and costs for some services not covered by your insurance plan. You may even be able to deduct mileage accrued while driving to and from regular medical appointments.
- Get tax credits for providing employees with coverage.
If you’re a small business owner providing group health insurance coverage for your workers, don’t forget that there may be special tax credits available to you. You may be able to deduct up to 50% of the amount you paid toward your employees’ monthly premiums if 1) you have 25 or fewer full-time-equivalent employees, 2) their average annual wages are $50,000 or less, 3) you pay at least 50% of their monthly premiums, and 4) you offer them coverage through a SHOP (Small Business Health Options Program) exchange.
- Fund your Health Savings Account (HSA) for 2015
An HSA is a tax-advantaged savings account used in conjunction with an HSA-eligible health insurance plan. Account contributions, qualified distributions and earnings on the balance in the account are all tax-exempt. An HSA allows you to deposit a portion of your pre-tax income into a savings account and use those funds to pay for qualified medical expenses. Unused money can accrue from year to year. If you have an HSA, be sure to deduct your contributions up to federally prescribed limits. Contributions designated for 2015 and made before April 15, 2016 can be counted toward your 2015 federal taxes. HSA contributions for the 2015 tax year are capped at $3,350 for individuals and $6,550 for families. If you’re over age 55, you may qualify to make an additional $1,000 contribution.
- Medicare premiums and medical home improvements
If you’re a retired senior, you may have an easier time meeting the 10% adjusted gross income threshold to deduct itemized medical expenses on your federal return. In addition to your out-of-pocket expenses for medical, dental or vision care, you may also be able to include capital expenses for the installation of home medical equipment or improvements to your property for wheel-chair access. In addition, premiums taken from your Social Security check to pay for Medicare Part B may qualify as deductible, as well as premiums you paid for Medicare Part D (Prescription Drug) coverage or a Medicare Supplemental plan.