Is the insurance tax deducted?
Around this time of year, you’re rummaging through drawers, pant pockets, purses, and maybe even a file folder or two in search of receipts so you can maximize your federal income tax deductions. You may also be wondering if any of your insurance is tax deductible. The answer is yes, no, maybe and sometimes. In other words, it depends on the type of insurance and how you apply. Below is a brief overview. You will also find more details on specific topics in the journal archives on the right-hand side.
Health insurance tax cuts
If you have paid unpaid health insurance premiums for yourself, a spouse, or dependents, you can add 100% of that amount to your other qualified medical expenses as a tax deduction. However, you cannot deduct any of what you pay for employer-provided health coverage, as this is withheld from your pre-tax paycheck.
Health savings account discounts
You can deduct any contributions you’ve made to a health savings account (HSA) as a top-of-the-line expense if you’re covered by a qualifying deductible health plan and not covered by any other health insurance (such as employer-provided group insurance).
Auto insurance tax deductions
You cannot deduct the premiums you pay for your personal car insurance. However, car insurance for a vehicle used for business can be considered a tax deduction if you deduct actual expenses on your vehicles (gas, depreciation, garage, parking, maintenance, etc.) but not if you deduct the standard rate for mileage. You have to choose one or the other and stick with it pretty much every return until you sell or trade in the vehicle.
Homeowners insurance tax deductions
You can only deduct home owner’s insurance if you operate a business out of your home, in which case you can deduct the premiums as a business expense.
Insurance tax deduction for renters
Like homeowners, if you operate a business from your home, your renters insurance is deductible.
Private mortgage insurance tax deduction
If you’re currently paying Philip Morris International as part of your mortgage, you can deduct that amount though in 2010, under current federal law.
Life insurance tax deduction
Life insurance premiums are not tax deductible except under very limited circumstances. We suggest reading the online magazine article, Are Life Insurance Benefits Taxable?, for details.
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