If you’re wondering whether you can write off your insurance deductibles on your taxes, you’re not alone.
Many people are unsure of what expenses can be deducted from their taxes, and insurance premiums and deductibles can be especially confusing.
In this article, we’ll answer the question “are insurance deductibles tax deductible?” and explain everything you need to know about the topic.
Introduction: Understanding Insurance Deductibles and Taxes
Before we dive into the question of whether insurance deductibles are tax deductible, it’s important to understand what insurance deductibles are and how they work.
An insurance deductible is the amount you pay out of pocket before your insurance company pays for any covered expenses.
Deductibles can vary depending on the type of insurance policy you have, but they are often a fixed dollar amount (e.g. $500 or $1,000) or a percentage of the total covered expenses (e.g. 10% or 20%).
When it comes to taxes, you can only deduct expenses that are considered “qualified” by the IRS.
This means that the expense must meet certain criteria in order to be deductible. For example, the expense must be considered “necessary and ordinary” for your business or job, and it must not be reimbursed by your employer.
In the case of insurance deductibles, the IRS has specific rules regarding whether they are tax deductible.
Are Insurance Deductibles Tax Deductible?
The short answer to the question “are insurance deductibles tax deductible?” is yes, in some cases.
However, it’s important to understand the specific rules and limitations surrounding this deduction.
Health Insurance Deductibles
If you have health insurance through your employer or purchased on your own, you may be able to deduct your health insurance deductibles on your taxes.
To do so, you must itemize your deductions on your tax return using Form 1040, Schedule A.
You can only deduct your health insurance deductibles and other medical expenses if they exceed a certain percentage of your adjusted gross income (AGI). For tax year 2021, the threshold is 7.5% of your AGI.
This means that if your AGI is $50,000, you can only deduct medical expenses that exceed $3,750 (7.5% of $50,000).
Auto Insurance Deductibles
If you have auto insurance, you may be able to deduct your auto insurance deductibles if you use your vehicle for business purposes.
However, this deduction is limited to the amount of expenses that exceed any reimbursement you receive from your employer or insurance company.
In other words, if your auto insurance deductible is $500 and your insurance company reimburses you $400, you can only deduct $100 on your taxes.
Homeowners Insurance Deductibles
If you have homeowners insurance, you may be able to deduct your homeowners insurance deductible if your home is damaged or destroyed by a sudden, unexpected event like a storm or fire.
However, you can only deduct the portion of the loss that is not covered by your insurance company.
For example, if your home is damaged by a storm and your insurance company covers $10,000 of the repairs, but you have a $1,000 deductible, you can only deduct $9,000 on your taxes.
Other Tax Deductible Insurance Expenses
In addition to deductibles, there are other insurance expenses that may be tax deductible. Here are a few examples:
Insurance premiums are generally not tax deductible, with a few exceptions. If you’re self-employed and pay for your own health insurance, you may be able to deduct your premiums as a business expense.