About this time of year, you’re digging through drawers, pants pockets, purses and maybe even a file folder or two looking for receipts so you can maximize your federal income tax deductions. You may also be wondering if any of your insurance is a tax deduction. The answer is yes, no, maybe and sometimes. In other words, it depends on the type of insurance and how you file. Here is a brief overview. You’ll also find more detail on specific topics in our Journal archives on the right hand side.
Health insurance tax deductions
If you paid non-reimbursed premiums for health insurance for yourself, spouse or dependents, you can add 100% of that amount to your other qualifying medical expenses as a tax deduction. You cannot, however, deduct any of what you pay for employer-provided health coverage, as that is taken out of your pay pre-tax.
Health savings account deductions
You can deduct any contributions you made to a Health Savings Account (HSA)as an above-the-line expense if you are covered by a qualifying high-deductible health plan and not covered by any other health insurance (such as employer-provided group insurance.
Car insurance tax deductions
You cannot deduct insurance premiums you pay for your personal car insurance. However, car insurance for a vehicle used for business can be taken as a tax deduction if you deduct actual expenses on your vehicles (gas, deprecia5tion, garaging, parking, maintenance, etc.) but not if you deduct the standard rate for mileage. You have to choose one or the other and pretty much stick with it on every return until you sell or trade in the vehicle.
Homeowners’ insurance tax deductions
You cannot deduct your homeowners’ insurance unless you operate a business out of your home, in which case you can deduct the premiums as a business expense.
Renters’ insurance tax deduction.
Same as homeowners, if you operate a business from your home, your renters’ insurance is deductible.
Private mortgage insurance tax deduction.
If you are currently paying PMI as part of your mortgage, you can deduct that amount though 2010, under existing federal law.
Life insurance tax deduction.
Your life insurance premiums are not tax deductible except under very limited circumstances. We suggest you read the eJournal article, Are Life Insurance Benefits Taxable?, for the details.
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