A health insurance tax deduction is a government allowed deduction on income earned for a tax period. The deduction focuses on the amount of expense incurred by the taxpayer in order to maintain a health insurance policy. Many nations allow some type of deduction when it comes to costs related to health insurance coverage. However, there is a great deal of variance between the deductions allowed in one country when compared to the health insurance deductions of a different country.
One of the qualifications that applies to just about all health insurance-related deductions is that the insured party can only claim expenses that were paid out of pocket. This means that if the taxpayer’s employer pays the total premium for the insurance coverage, the employee cannot claim the deduction at all. However, many countries will allow the insured party to claim any portion of that premium that is paid directly or by way of a payroll deduction.
People who are self-employed and thus pay all of the monthly premiums associated with health insurance coverage can claim a full health insurance tax deduction. Depending on current tax laws, this may mean the ability to deduct the full amount paid for the insurance coverage during the tax period. In other instances, it may mean the taxpayer can claim a fixed percentage of the total annual premium for the health insurance coverage.
Just about every national tax agency provides clear instructions as to which conditions apply to the task of properly requesting a health insurance tax deduction. In the United States, the Internal Revenue Service or IRS issues guidelines that help those employed full time as well as those who support themselves in a self-employment situation understand what is required to qualify for the deduction. The guidelines also address how to calculate the exact amount that can be deducted. Tax agencies in other countries also provide updated information to taxpayers on an annual basis, helping to keep all citizens aware of any changes that impact the calculation of income taxes and the deductions that are available under specific circumstances.
It is important to not assume that the health insurance tax deduction allowed will remain constant from one tax period to the next. As with other types of deductions, there is always the possibility of a change in tax laws that will impact the amount that can legally be claimed for the period under consideration. For this reason, it is always a good idea to review all tax laws and government issued support documents that address this and other allowable deductions. Taking the time to make sure you follow all current instructions as they relate to claiming a health insurance tax deduction will minimize the chances of making an error on the tax return and incurring a penalty in addition to owing the amended amount of taxation for the period.