Is My Medicare Supplement Insurance Rate Tax-Deductible?
The Effect A Medicare Supplement Insurance Rate Has On Taxes – How Significant Is This And Can It Help Me?
Medicare Supplement Insurance rate premiums are a tax-deductible expense. However, a Medicare supplemental insurance plan, provided by government approved private insurance sources, is an option only when Medicare Plans A, B and/or D are in effect. Medicare considers Supplemental Insurance plans “gap” insurance so Part C Advantage Plans, by definition, overlap the intended purpose of gap insurance. As confusing as this may sound, there are some simple guidelines to determine how much of what is deductible when.
Just What Part Of The Medicare Supplement Insurance Rate Is Tax Deductible?
If you are receiving Social Security, you are automatically eligible for Medicare’s Plan A hospital coverage at no charge. Part B of the Medicare insurance plans provides coverage for outpatient fees and charges premiums. Part D also charges premiums for prescription drug costs. Medicare Supplemental Insurance bridges recognized gaps in the coverage of A, B and D. In this case, premiums for Part B and D as well as payment for the privatized Medigap insurance are all tax-deductible expenses. Part C and Medicare Supplemental Insurance are mutually exclusive. Medicare will not allow both to be in effect at the same time.
How Do Tax Deductible Supplemental Insurance Premiums Help Me?
Finally, the real benefit of the tax-deductible nature of Supplemental Insurance premiums is evident when calculating aggregate medical expenses. Total medical expenses must exceed 7.5 percent of adjusted gross income (AGI) to deduct them from taxes. Typically, Part B premiums are $1,157 per covered person and Part D premiums are about $360 per covered person. When copayments, coinsurance and non-formulary drug payments are included with the Part B and D premiums, adding Supplemental Insurance payments, anywhere from $1,000 to $2,000 per covered individual, can often be enough to meet the 7.5 percent AIG requirement. Meeting the AIG minimum can result in a significant break for fixed-income plan participants.