By NEIL DOWNING
The Providence Journal
19-JAN-06
Q:
On my taxes, I am wondering if you can deduct what you pay for Medicare and medical insurance.
E.M., Pawtucket, R.I.
A:
Yes. But there are some hurdles. First, though, the good news:
The law lets a taxpayer claim a federal income-tax deduction "for medical care of the taxpayer, his spouse, or a dependent ... "
Does "medical care" include insurance? Yes. In fact, the law that allows the medical-expense deduction specifically mentions amounts paid for insurance, and specifically mentions premiums for Medicare Part B, too. That's especially good news, because the cost of Medicare Part B just went up.
Medicare is the federal health-insurance program that generally covers people 65 and older and the disabled. A section of the program, called Medicare Part B, generally helps to cover the cost of visits to the doctor and other outpatient services.
Most Medicare beneficiaries pay a monthly fee _ a "premium" _ for Medicare Part B. For 2006, that premium is $88.50 a month for most beneficiaries, up from $78.20 a month for 2005.
So those and other insurance premiums can be deducted. The bad news is that not everyone can claim the deduction. The same law that allows the medical-expense deduction (it's Section 213 of the Internal Revenue Code) also limits who can claim it.
In general, you're not eligible if, on your federal income-tax return, you claim the lump-sum deduction known as the standard deduction. (About two-thirds of taxpayers take the standard deduction.)
Instead, you must make a separate list of your deductions, a process known as itemizing (done on Schedule A of your U.S. Form 1040).
Even then, you're allowed to claim only those medical expenses that exceed 7.5 percent of your adjusted gross income (AGI). So if your AGI is $30,000, you may deduct only the health insurance premiums and other medical expenses that exceed $2,250.
To learn more, see Internal Revenue Service Publication 502, "Medical and Dental Expenses." For a free copy, visit your local IRS office, call the agency toll-free at 1-800-829-3676, or use this IRS Web site:
IRS Forms & Publication
(Neil Downing is the author of "The New IRAs and How to Make Them Work for You." E-mail questions to moneyline@projo.com or leave a message at 401-277-7484. No personal replies, but as many questions as possible will appear here.)
(Distributed by Scripps Howard News Service, http://www.shns.com.)
