A simple question? -YES
A simple answer NO?
We explain who is eligible and how much you can claim.
First, let’s briefly consider the purpose of health insurance and secondly the reason why since 2010, the federal government, through the Affordable Care Act (ACA), has sought to bring high-quality healthcare within reach of many millions of American citizens.
At its simplest, insurance is designed to share risk. In the case of health insurance, share the cost of otherwise unaffordable medical treatment, and spread the cost over the lifetime of your plan. By having many members, the insurer can also spread costs over thousands of health insurance plans. By having many members, insurers can influence the price paid to services providers and thus offer better value premiums to their members.
The ACA recognizes the need for individuals to have access to affordable healthcare and the benefit of preventative assessments. For those two reasons, the ACA mandates that all ACA compliant plans include the ten Essential Healthcare Benefits and attract premium tax relief.
Who is eligible for premium tax relief?
Almost 50% of US citizens benefit from a group (employer-sponsored) health insurance plan.
- If you are a member of your employers’ plan, you will almost certainly be paying your share of the premium with pre-tax dollars (warning! don’t make any additional claims at the end of the year)
- Suppose your employer does not offer a company-sponsored health insurance scheme, and you pay your insurance premiums from after-tax income. In that case, the IRS allows you to deduct ‘unreimbursed medical’ expenses, i.e., not covered by your plan. This relief applies only to cumulative medical expenses, i., over 7.5% of your adjusted gross income. (AGI).
Unreimbursed medical expenses include preventative care and necessary, non-cosmetic surgeries. Visits to your doctor’s office, a psychologist or psychiatrist, prescription medicines and, appliances also qualify.
In most circumstances, it is more beneficial to pay for your health insurance from pre-tax dollars and have the advantage of your employer’s contribution to your monthly premiums. You also avoid the need to make an annual itemized claim for your medical expenses. You should still keep medical bills!
- In case of a dispute with one of your service providers/insurers/IRS
- It will be helpful when to come to decide on your future health plans
Just under 6% of the US population rely on non-group (individual) plans and are directly responsible for their own and dependents’ health insurance plans. Most self-insured individuals are self-employed or financially self-sufficient.
- As a self-employed individual, you can claim 100% of the premium you pay for yourself and your dependents. You will need to itemize your claim for uninsured medical expenses, but the 7.5% rule (see para (ii) above) does not apply.
- There are some circumstances in which you may not claim this deduction
- You are eligible to join another employer’s group plan and have chosen not to
- Although you are self-employed, you have another job that offers membership of an employer-sponsored plan
- You are self-employed, but you are eligible to be included on your spouse’s employer-sponsored plan.
Seniors qualified for and receiving Medicaid can claim premium tax relief on Advantage other supplementary plans. They can claim tax relief for unreimbursed medical expenses that exceed 7.5% of their AGI. (see para one, above)
We have referred to tax-deductible medical expenses. The following is a brief list of costs accepted by the IRS. They include payments:-
- To doctors, dentists, surgeons, anesthetists
- For prescription medicines, acupuncture treatment, participation in weight-loss-programs
You may also be able to claim (subject to some limitations) for the cost of medical appliances such as hearing aids and false teeth.
You can find further guidance on the Inland Revenue Service website, Finally, Be sure to keep copies of invoices for your unreimbursed COVID-related medical expenses, including travel and parking. You can claim relief for all of these.