Are Your Medicare Premiums Tax Deductible?
There are a lot of financial considerations to make as an older adult, and knowing everything about Medicare goes a long way when it comes to planning for retirement. Learning about whether or not your Medicare premiums are tax deductible, for example, can help you feel confident in your tax preparation. In this post, we’ll help you understand which Medicare expenses are tax deductible.
Key takeaways:
Many medical expenses, including your Medicare premiums, may be tax deductible.
In order to apply tax deductions to your Medicare premiums and medical costs, you must have relatively high medical expenses for the year. You’ll also have to itemize deductions on your tax return.
Cosmetic procedures and services are not tax deductible.
Requirements for tax deductible Medicare premiums
Medicare premiums may be tax deductible, but there are certain limitations and conditions. First, only medical expenses that exceed 7.5% of your adjusted gross income (AGI) are eligible for the tax deduction. Second, you must itemize deductions on your tax return. If you meet these conditions and you want to utilize the deduction, you’ll need to keep a record of your medical expenses with receipts for itemized deductions.
We’ve shared a detailed example below, so you can understand this a little better:
Richard is 65 years old, on Medicare, and had to undergo a few surgeries in the past year. He has an adjusted gross income of $80,000, so he’ll be able to deduct medical costs that exceed $6,000. Richard’s medical expenses include his Medicare Part B premium, out-of-pocket costs for the surgeries and doctor visits, and out-of-pocket costs of the medical equipment he needed to recover—totalling $6,500. $500 of medical expenses would be tax deductible in Richard’s situation.
What to do if you’re self-employed
If you’re self-employed, your Medicare premiums may also be tax deductible, and you may not have to meet the 7.5% AGI requirement. However, you can’t qualify for this tax deduction if you or your spouse have employer health insurance. This deduction applies to all Medicare premiums, including Part A, Part B, Part C, and Part D.
Other medical expenses that may be tax deductible
There are a lot of different kinds of medical costs that are tax deductible, whether or not Medicare covers them. For example, Original Medicare generally doesn’t cover dental, hearing, or vision care, but associated costs may be tax deductible. The same goes for mobility devices and other medical equipment, mental health services, and chiropractic care (all of which may be covered by Medicare under certain conditions).
What Medicare costs are not tax deductible
A few medical expenses aret generally ineligible for tax deductions, but most of these will probably not surprise you. Things like cosmetic procedures (certain surgeries, teeth whitening, and hair transplants) are not tax-deductible. Medicare also doesn’t cover any cosmetic services strictly for the purposes of improving appearance outside of medically necessary reconstruction surgeries.
Another important note is that any HSA contributions aren’t tax deductible either while you are on Medicare. In fact, you can face tax penalties if you continue to contribute to an HSA once you apply for Medicare. Make sure you avoid any tax penalties related to your HSA while on Medicare.
We recommend you consult a tax professional if you have any concerns about what is and isn’t tax deductible for Medicare. If you have questions about your specific Medicare plan and costs, we’re happy to help! Call a Chapter Medicare Advisor for free, personalized Medicare advice at 855-900-2427 (TTY 711) or schedule a time to chat.
The content we provide on this page is for general informational purposes only and is not intended as personal tax advice. Always consult a tax professional if you need help understanding the tax deductions that may be available to you.