As a Senior Are You Deducting Your Medicare Premiums?
Many seniors have gotten in the habit of taking the standard deduction when figuring their income taxes as they often have no mortgage interest deduction and only a small state income tax deduction. But those seniors aged 65 and older should be reminded that their Medicare insurance premiums as well as their supplemental insurance premiums may be deductible.
The general rule for medical deductions is that they are deductible only if they exceed 10% of your Adjusted Gross Income (up from 7.5% in earlier years). However, for those over 65 at the end of 2015 the lower threshold of 7.5% has been retained. So when calculating your medical expenses including out-of-pocket costs, don’t forget to include Medicare and supplemental insurance cost for you and your spouse to see if your costs exceed the 7.5% threshold.
In addition, there is even better news for those people who are self-employed. In 2012 the IRS reversed their long held stance and ruled Medicare premiums are 100% deductible from self-employment income starting for the year 2010. It has also be extended to dental and qualifying long term care insurance premiums as well. Moreover, you can deduct your own insurance and that of your spouse and any qualifying child or dependent. Children can include those up to age 27. Besides a sole proprietor, a self-employed individual for this purpose can include certain partnership and Sub-S corporation employees (you must be a more than 2% shareholder/partner). If you take this deduction you may not also deduct them under the 7.5% rule.
There is a limit to your deducting Medicare and other premiums from your earned income from a business. You must have profits to offset any of these deductions, otherwise they are only deductible to the extent of profits.
If you have overlooked either of these opportunities to deduct Medicare and other insurance premiums, you can amend your prior year tax returns generally for up to three years (2013-2015). Before making any decisions please consult your tax advisor.