Filing 2019 Taxes? These Health Insurance Tax Tips Could Save You Money
As the extended July 15 deadline to file 2019 taxes approaches, it’s never too early to start looking over your paperwork. And when you do so, keep an eye on your health insurance and medical expenses – it could save you money.
In addition to pushing back the tax filing deadline, the coronavirus pandemic may impact other aspects of your tax profile too. Deadlines for HSA (health savings account) contributions, for example, have also been delayed giving you extra time to deposit additional funds to your account.
To help you make the most of your 2019 taxes, eHealth has put together these five health insurance tax tips that could help save you and your family money this year:
- Fund your HSA for 2019 - If you have an HSA, there’s still time to max out your contributions for 2019, just do it before July 15, 2020. The original April deadline was pushed back when the federal tax deadline was delayed due to the coronavirus crisis. HSA contributions for the 2019 tax year are limited to $3,500 for individuals and $7,000 for families. If you’re over age 55, you can add an additional $1,000 to your account for 2019. Not sure if your health plan is eligible for use with a HSA? Ask your insurer or insurance agent.
- Beware of the “claw-back penalty” - If you received federal government subsidies in 2019 to help cover the cost of your health insurance plan, the income you list on your tax return could retroactively alter your eligibility for those subsidies. If you earned more money in 2019 than you originally estimated, you may be required to pay some portion of your subsidies back to the IRS, or have that amount deducted from your tax refund. On the other hand, if you earned less than expected, you may have been eligible for additional assistance that could potentially reduce your tax bill for 2019 and increase your refund. Repayment is capped for most people who receive too much in subsidies, depending on income and tax filing status.
- Know if you qualify for medical expense deductions – IRS Publication 502 provides a list of qualifying medical expenses that may be deductible on your return. These can include monthly premiums you pay for certain kinds of coverage (including some Medicare premiums), copayments, deductibles, dental expenses, and costs for some services not covered by your insurance plan. You may also be able to write off the cost of installing home medical equipment or improvements to your property for wheel-chair access. For the 2019 tax year, you can only deduct qualifying medical expenses that exceed 7.5% of your adjusted gross income.
- Understand your benefits if self-employed - If you’re a qualifying self-employed person who buys your own health insurance, you may be able to write off your premiums “above the line” on your 1040. This deduction is not limited to the over-7.5% threshold for other medical expenses deductions. Certain restrictions may apply depending on your income and other circumstances, so be sure to check with your accountant.
- Watch out for discrepancies between federal and state tax penalties - Originally, the Affordable Care Act (ACA) imposed tax penalties on many people who did not have qualifying health insurance coverage. Those federal penalties are no longer in effect. However, starting in 2020 California will impose its own version of these penalties, which may need to be reconciled on your state tax return. Other states may follow suit, so watch out for differences in the way health insurance is treated on federal and state returns.
With less than a month to go before taxes are due, familiarizing yourself with these health-related tax tips could possibly save you money on your returns. It’s important to note that eHealth is not a tax advisor and the tips provided above are for information purposes only. So before filing your taxes, consult with a professional tax advisor to see how tax laws may apply to you.