Health Insurance and Your Income Tax Return: eHealthInsurance Releases Tips for Consumers during Tax Season
February 23, 2011 | Consumer Advice
MOUNTAIN VIEW, CA—February 23, 2011 – Today eHealthInsurance (NASDAQ: EHTH), the leading online source of health insurance for individuals, families and small businesses, released a series of tips for health insurance consumers working on their 2010 federal tax returns.
Many consumers overlook deductions built into the tax code that are designed to make health insurance more affordable. Consumers who are self-employed, who pay for their own individually-purchased health insurance, or who were on COBRA in 2010, should educate themselves on the federal tax implications health insurance coverage may entail. While the tips below do not constitute tax advice, eHealthInsurance recommends that consumers explore these issues with a certified public accountant or tax professional when completing their federal income taxes for the year 2010.
Health Insurance Tax Tips for Tax Year 2010
- New this year! Take a one-time opportunity to reduce your self-employment taxes – In addition to the standard ‘above the line’ deduction described below, self-employed persons can also deduct the cost of their health insurance premiums from their self-employment taxes on Schedule SE. This is a one-time-only opportunity available for 2010 taxes, so if you’re self-employed be sure to take advantage of it.
- Deduct health insurance premiums as a business expense - If you had self-employment income in 2010, you may also be able to deduct health insurance premiums you paid for yourself and your dependents as an ‘above the line’ business expense (that is, without itemizing) on your federal tax return. Be aware, however, that you may not deduct premiums paid for any month in which you were eligible to participate in an employer-sponsored health insurance plan, and that the amount you deduct cannot be greater than your net self-employment income for the year. Also, keep in mind that you cannot include what you paid toward your monthly premiums as an ‘above the line’ expense and also itemize it as described in the next tip. Talk to a tax professional to learn more about the different types of self-employment status and the tax implications of each in your state.
- Itemize your health insurance and medical expenses – Even if you’re not self-employed, if you itemize on your federal tax return you may be able to deduct medical expenses from your taxable income. According to IRS Publication 502, qualifying medical expenses may include monthly premiums you pay for coverage (including some Medicare premiums), copayments, deductibles, dental expenses, and costs for some services not covered by your insurance plan. Keep in mind: you can only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income. That means this deduction isn’t for everyone, but if you (or one of your dependents) were seriously ill or hospitalized last year – or if you paid COBRA premiums (without receiving federal subsidy) – you may qualify.
- Maximize your refund with your Health Savings Account (HSA) - An HSA is a tax-advantaged savings account used in conjunction with an HSA-eligible health insurance plan. Account contributions, qualified distributions and earnings are all tax-exempt. An HSA allows you to deposit a portion of your pre-tax income into a savings account and use those funds to pay for qualified medical expenses. Unused money can be invested and accrue from year to year. If you have an HSA, be sure to deduct your contributions up to federally prescribed limits. Contributions to your HSA designated for 2010 and made before April 18, 2011 can be counted toward your 2010 federal taxes. According to IRS Publication 969, HSA contributions for the 2010 tax year are capped at $3,050 for individuals and $6,150 for families.
- Be aware of how the COBRA subsidy may alter your taxable income – Persons enrolling in COBRA as the result of a lay-off after June 1, 2010 no longer qualify for the 65% federal COBRA subsidy, but plenty of people who did qualify for the subsidy were still receiving it in 2010. If you received the COBRA subsidy, your taxable income may increase depending on how much money you made in 2010. If your adjusted gross income was between $125,000 and $145,000 ($250,000 - $290,000 for those filing joint returns), you may only be eligible to retain a portion of that subsidy. If your adjusted gross income was greater than $145,000 ($290,000 for joint-filers), you are not eligible for the subsidy and should review your tax liability for the subsidy carefully.
Please note that the provisions discussed above may apply differently to you based upon your circumstances. Your local certified public accountant or tax professional will be able to advise you in light of those circumstances.
eHealth, Inc. (NASDAQ: EHTH) is the parent company of eHealthInsurance, the nation's leading online source of health insurance for individuals, families and small businesses. Through the company's website, www.eHealthInsurance.com, consumers can get quotes from leading health insurance carriers, compare plans side by side, and apply for and purchase health insurance. eHealthInsurance offers thousands of individual, family and small business health plans underwritten by more than 180 of the nation's leading health insurance companies. eHealthInsurance is licensed to sell health insurance in all 50 states and the District of Columbia, making it the ideal model of a successful, high-functioning health insurance exchange. Through the company’s eHealthTechnology solution (www.eHealthTechnology.com), eHealth is also a leading provider of health insurance exchange technology. eHealthTechnology’s exchange platform provides a suite of hosted e-commerce solutions that enable health plan providers, resellers and government entities to market and distribute products online. eHealth, Inc. also provides powerful online and pharmacy-based tools to help seniors navigate Medicare health insurance options, choose the right plan and enroll in select plans online through its wholly-owned subsidiary, PlanPrescriber.com (www.planprescriber.com) and through its Medicare website www.eHealthMedicare.com.
For more health insurance news and information, visit the eHealthInsurance consumer blog: Get Smart – Get Covered.