How do health care reform and taxes connect? The Affordable Care Act is single largest change to the tax code in two decades. Find help navigating the complexities of the new health care legislation, Medicare, Medicaid and other medical deductions.
03-09-2018 11:41 AM
Last year (2016) when filling out my taxes, when I put in the amount I paid out health insurance premiums the tax program told me I could not report more than a certain amount because of the premium tax credit. This year, that did not happen. If I get my health insurance through the marketplace, I get a premium tax credit. Am I still able to deduct the health insurance premiums that I paid throughout the year? Using this deduction doesn't make much of a difference on my federal return but it makes over a $100 difference on my state return.
03-12-2018 07:57 AM
03-15-2018 12:06 AM
The amount of premiums that you can deduct on Schedule A is the amount that you will end up paying out of your pocket (i.e. the amount after ALL of the subsidies have been subtracted from the original total premium cost). For example, if the total premiums were $10000 and you had $2000 in Advance Premium Tax Credits (APTC), you would have paid $8000 through out the year. This would be the deductible amount if you didn't get any additional credit or have to pay back any of the APTC on your return.
BUT, if you're getting additional subsidies when you file your return, perhaps because you ended up making less than you expected or you didn't take all of the subsidies available to you during the year, you must also subtract that amount from your "out of pocket" premium cost. So, going back to our example, let's say you also got $1000 additional PTC when you file your 1040. You'd have to reduce the amount you're deducting on Schedule A by that amount, so the amount would be $10000-$2000(APTC)-$1000(PTC)= $7000, because that would be the amount you actually had to pay for your insurance premiums.
On the other hand, if you made more than you had estimated and end up having to pay back $500 of your APTC, you'd add that to your "out of pocket" premiums because you ended up paying that amount. So the calculation would be $10000-$2000(APTC)+$500(repayment of APTC)=$8500. Once again the amount you'd end up paying for premiums out of your pocket.