|  | Healthcare Industry | Health Insurance

Tax Information for Health Insurance

The federal government allows some taxpayers to deduct some of their health insurance costs on their tax returns. In 2010, Congress enacted the Affordable Care Act, giving eligible taxpayers some new opportunities to deduct the costs of obtaining health insurance coverage. Most of the new laws take effect in 2011 and have sunset periods or expiration dates for when the law is no longer applicable.

  1. W-2s Changing in 2011

    • The IRS will begin requiring employers to report the monetary value of the health care coverage they provide to their employees on their W-2s. This reporting requirement is for informational purposes only. The IRS will not tax employees for this amount.

    Medicare Part D Recipients

    • The Affordable Care Act provides Medicare recipients paying for Part D or medical prescription coverage with help paying for any costs that exceed the recipient's plan limits. The Medicare credit is a one-time 2010 rebate of $250 from the government. The IRS does not tax this rebate from Medicare.

    Small Business Tax Credit

    • The Small Business Health Care Tax Credit gives small business owners tax incentives to provide their employees with group health insurance coverage. The credit encourages business owners with 10 or fewer employees to provide new coverage or maintain existing coverage to employees who are usually within lower tax brackets. Small business owners who pay for at least 50 percent of the health insurance costs for their employees can use a credit of up to 35 percent of the premium's costs to offset their tax liabilities annually from 2010 until 2013.

    Deductions for Family

    • The IRS allows business owners to obtain tax-free health insurance coverage for the owner's children age 27 and younger. Business owners can obtain health insurance for their qualified children using pre-tax dollars to subsidize the insurance.

    Self-Employed Taxpayers With Net Profits

    • Self-employed taxpayers can deduct the costs of medical insurance for the taxpayer and any of the taxpayer's dependents using Line 29 of IRS Form 1040. Taxpayers choosing to deduct these expenses may only take deductions for months in which the taxpayer was not able to obtain insurance through an employer's subsidized group plan or spouse's employer's group health insurance plan.

    IRS Health Tax Credit

    • The IRS provides trade-affected employees with a health care premium subsidy. As of 2010, eligible taxpayers may take the Health Coverage Tax Credit allowing the individual to pay for only 20 percent of the taxpayer's insurance premium while the government pays for the remaining portion. The IRS sends the government's portion of the premium directly to the health plan. Depending upon Congress' actions to extend the American Recovery and Reinvestment Act, the amount of the health tax credit and coverage for dependents may change at the end of 2010.

    Find Tax Help

    • Since tax laws may frequently change, you should not use this information as a substitute for legal or tax advice. Seek advice through a certified accountant or tax attorney licensed to practice law in your jurisdiction.

Health Insurance - Related Articles