Each year, Americans begrudgingly bust out their calculators and pull out their receipts, as they painstakingly search for any expenses they can deduct from their taxes. In reality, taxes are one of the most expensive costs you incur each year, so it makes financial sense to find every loophole. It’s why tax attorneys exist and make so much money.
The problem is unless you’re a seasoned vet, it’s difficult to file for returns or deductions without having some background knowledge. The good news, at least for this article, is you’ll finally have a clear understanding about which part of your Medicare expenses you can claim on your taxes for deductions. So, without further ado, let’s get started.
If you the right conditions, then yes, your Medicare Part B premiums may be tax deductible. In fact, any medical expenses that exceed 7.5% of your adjusted gross income (AGI) for the year, may be deducted from your taxes. That includes things like dental, vision, and even out-of-pocket expenses.
Anyone enrolled in Medicare Part B, or any Medicare plan for that matter may be eligible for deductions. As mentioned before, as long as you’re paying more than 7.5% of your AGI towards medical expenses, you can deduct those expenses from your taxes. Let’s take a look at the following example.
If your annual adjusted gross income comes out to $50,000 for the year, 7.5% would equate to $3,750. That means, if any medical expenses that you pay for the year exceed $3,750, they would be tax deductible.
Using the same example, say your monthly Medicare Part B premium amounts to $134 each month. Multiply $134 by 12 months, and you’ll end up paying $1,608 in premiums alone. Now, let’s say you go in for checkups, prescriptions, tests, and other services throughout the year, and the costs amount to $5,000. Between your out-of-pocket expenses and premiums, you end up paying $6,608 in medical costs.
This is the part where you may want to grab a calculator. Remember, you can deduct anything that exceeds 7.5% of your income, which in this scenario amounts to $3,750. So, let’s do the math. You spent $6,608 on medical expenses, so the formula would look like this:
** $6,608 - $3,750 = $2,858
In the scenario above, you would be able to deduct $2,858 from your taxes, which includes Premiums from Medicare Part B, and all other medical expenses. It’s important to keep accurate records of your medical bills to ensure you are getting the most out of your tax deductions.
Medicare pre-tax payments for all services are tax deductible, but you must have receipts to show that you spent this money. You will find that your payments for Medicare Parts A, B, C, and D are all deductible in one way or another. Your Part B tax deduction is just one part of your return because you might not have spent that much on this insurance during the year.
However, you are allowed to deduct everything you spent on Medicare because there are a lot of ancillary expenses that you might have had during the year. You simply must keep track because many people come to the end of the year knowing that they spent extra money on Medicare without having any proof at all that they were spending that money.
The Part B tax deduction comes out in all cases, but there are certain costs that are not deductible. You must remember that there is a Medicare reimbursement program that will pay you back for things that were not covered when the service was rendered. If you paid out-of-pocket, you can get that money back. If you were reimbursed, that money is not deductible.
Medicare knows that it paid you back for your services, and you cannot leave those expenses on your return. Certain things are simply not covered by Medicare at all, and you cannot get any money back for things that were not covered. Someone who plans to ask for a deduction on their taxes for an uncovered expense will have that deduction denied because it is not covered under any part of Medicare.
Medicare pre-tax expenses cannot be listed if they do not fall under the coverage options that you see listed on your paperwork. You might need to change plans if you are not getting the right level of coverage, or you have to have spent a large amount of money during the year on Medicare pre-tax expenses to make those bills deductible.
Tax deductions for 2018 include everything that is covered under your plan. The deduction levels change based on the tax code for that year, and you might want to speak to an accountant who can explain how the deductions are done. Someone who is trying to work out their deductions might have problems if they have not checked the current tax code, or they might have forgotten that they have been reimbursed for certain expenses. It is best to check at least one more time before filing your return.
