For many of us, 2011 was not the best of times economically. Adding insult to injury, taxes are due in a few weeks. Assuming you’re not Warren Buffett eager to give the government more, take advantage of every legitimate tax deduction you’ve got coming and don’t pay a penny more than you have to. Here are some personal insurance policies that are tax deductible. Individual circumstances vary, and you should always check with a professional tax preparer or the IRS to be on the safe side, but in general, here are some personal insurance tax deductions that may be available to you.
Health Insurance.If you are self-employed and have a health insurance policy opened in your name for your benefit, you can write off your premiums above the line on your federal tax return. (An above the line deduction is taken before you arrive at your final adjusted gross income, helping to reach a lower number and hence a lower tax rate.) Deductible health insurance can include your medical coverage and supplemental insurance such as dental, vision and prescription plans, too. However, as with all things government, there are a couple of qualifiers for the self-employed health insurance deduction: you cannot be eligible for employer-provided health coverage through another job or your spouse’s job; and your business must show a net profit that’s greater than the price of your health insurance.
Your out-of-pocket expenses cannot be included with your health insurance premiums. They may be deductible if the total out-of-pocket exceeds 7.5% of your adjusted gross income and if you itemize your deductions in the first section of Schedule A.
Under the Affordable Care Act of 2010, you may now be entitled to a deduction for health coverage you provide for children up to age 27. If you have an employer-provided cafeteria-style health insurance plan, your employer can let you make pre-tax contributions to pay for this expanded benefit. If you qualify for the self-employed health insurance deduction, the rule also applies to you.
Life Insurance. In most instance, life insurance premiums are not tax deductible on your personal tax return.
Car Insurance. If you use your car for business and deduct actual expenses (versus the business mileage deduction), you can deduct the portion of your car insurance premium relative to the percentage of business use.
Homeowners Insurance. You can deduct this only if you have a home office or if you are renting out part of your home and report that income and expense. If you own rental property, the premiums are deductible.
Disability Insurance. The premiums you pay aren’t deductible, but any income derived is taxable, either.
Premiums as Part of a Divorce Settlement. If you are divorced or in a court-ordered separation, you can deduct any premiums you pay for life insurance or homeowners insurance for your ex-spouse. Your ex has to declare those premiums as taxable income.