If you are enrolled in Medicare and paying for a Medicare Supplement (Medigap) plan, you might be wondering whether you can deduct these premiums on your taxes. Below, this Supplemental insurance agency in Northwest Indiana is going to highlight some of the key things you should know about the topic.

Are Medigap premiums considered a deductible medical expense?

Medigap premiums are considered a qualifying medical expense under IRS rules. So, in the right situation, you may be able to deduct what you pay for your Medicare Supplement plan at tax time.

The important thing to know is that this is not an automatic tax break for everyone. To actually benefit, you generally have to itemize your deductions (instead of taking the standard deduction) and your total eligible medical expenses usually need to go beyond a certain IRS threshold based on your income.

That is exactly why it can be helpful to work with an experienced Supplemental insurance agency in Northwest Indiana. They can help you understand what your monthly premiums and healthcare costs could look like over the course of the year as well as how those expenses could affect you financially during tax season.

What IRS rules do you need to know to deduct Medigap premiums?

To learn if your Medigap premiums are tax-deductible, you should understand how the IRS looks at medical expenses in general. In many cases, the IRS does allow you to deduct certain unreimbursed medical costs, but only if you itemize your deductions on Schedule A. And yes, that can include health insurance premiums you pay out of pocket, including Medigap premiums.

The catch is that the deduction only applies once your total qualifying medical expenses go over 7.5% of your adjusted gross income (AGI). So, if your medical spending is not especially high, that threshold can wipe out the tax benefit completely.

Another important thing to keep in mind is that this only helps you if you itemize your deductions. If you take the standard deduction, your medical expenses (including Medigap premiums) will not affect your federal taxes, even if you are paying a lot each month.

This is where working with a good Supplemental insurance agency in Northwest Indiana can be useful. They can help you get a clear picture of what you are paying in premiums over the course of the year. This will make it easier to plan and share accurate numbers with your tax professional.

Why don’t Medigap premiums lower your taxes automatically?

One of the most common misunderstandings is that Medigap premiums automatically lower your taxable income. In most cases, Medigap premiums only help you on your taxes if you are itemizing deductions and your total eligible medical expenses for the year are high enough to clear the IRS threshold. Right now, that threshold is 7.5% of your adjusted gross income. Unless your medical spending is quite substantial, you might not see any tax benefit at all.

That is why the people who benefit most from deducting Medigap premiums usually fall into a few specific situations. For example, retirees who have higher medical costs during the year tend to have a much better chance of qualifying. Think frequent outpatient visits, lots of specialist appointments, diagnostic testing, physical therapy or ongoing treatment for long-term conditions. In those kinds of years, your Medigap premiums can push your total medical spending over that 7.5% AGI mark.

Married couples can also be in a stronger position to qualify, especially if both spouses are paying Medigap premiums. When two people’s expenses add up under the same tax return, it becomes easier to cross the threshold.

Another group that may benefit includes people who already itemize deductions for other reasons. Maybe you have substantial charitable giving or a mortgage interest. In that case, adding Medigap premiums and other medical costs can maximize a deduction you were already planning to take anyway.

Even if you don’t qualify for a deduction every year, you should still know the rules. Medical expenses can change a lot from year to year. And what did not qualify this year could qualify next year if your care needs increase or you have a big one-time expense.

Looking for a Supplemental insurance agency in Northwest Indiana?

Do you have unanswered questions about Medicare Supplement premiums? If so, and if you’re ready to sit down with a professional Supplemental insurance agency in Northwest Indiana, Senior Care Insurance Services (SCIS) is the place to go. We can help you compare Medigap plans and choose the plan that best suits your needs. Contact us today to learn more.