Please note that this article is for informational purposes only and shouldn’t be taken as tax advice. We recommend that you consult with a tax professional if you have tax-related questions or need assistance, as tax rules can vary based on your state, your income, your employment status, and your personal situation.
Many seniors already live on a fixed income, so every dollar saved goes a long way. This includes the deductions taken on your annual taxes, where you can deduct a variety of medical expenses.
Are Medicare premiums tax-deductible? Yes! Taxpayers have the option of deducting their Medicare premiums from their taxes, but there’s a catch: you can only deduct expenses that exceed a certain portion of your income. Make too much, or not spend enough, and you’re unable to take advantage of this deduction.
Below, we’ll explain what you should know about deducting Medicare premiums from your annual taxes.
In this article, we’ll cover the following:
Medicare expenses can be tax-deductible, including premiums.
Medicare expenses are deductible if they exceed 7.5% of your adjusted gross income.
Medicare premiums can be deducted pre-tax if you’re self-employed.
As a general rule, unreimbursed medical and dental expenses may be deductible if they exceed 7.5% of your income, a rule that extends to Medicare premiums.
Which Medicare Premiums are Tax Deductible?
Keep in mind that Medicare isn’t a single insurance policy. Instead, think of Medicare as a collection of different programs that provide separate forms of health coverage. This means that the premiums you pay will depend on the part of Medicare you use.
Medicare Part A
What premiums are associated with Medicare Part A? That depends on how many quarters of qualified employment you’ve maintained. As of 2023, the premiums are as follows:
40 quarters of qualified work history: No premium
30-39 quarters of qualified work history: $278/mo
Less than 30 quarters of qualified work history: $506/mo
This means that many people will pay no premium for Medicare Part A, but others may deduct the premiums they pay from their yearly taxes.
Medicare Part B
Medicare Part B covers physician services and outpatient treatment. In 2023, the standard Medicare Part B premium is $164.90, though some may pay a higher rate depending on their income from last year’s tax return. Premiums are deducted from your social security checks, so if you qualify for social security your premiums are deducted before you’re paid.
Medicare Part C
Medicare Part C, also known as Medicare Advantage, is actually a healthcare plan from a private insurer, and functions as an add-on to Medicare parts A and C. Those who use Medicare Part C will have to pay the premium from Part B, as well as the premium for their policy, which varies from person to person.
Medigap is intended as an alternative to Medicare Part C. This plan is designed to serve as Medicare Supplement Insurance, and like Part C, comes from private insurance providers. This means that once again, premiums will vary considerably, sometimes even for the identical policy.
Medicare Part D
Medicare Part D covers the cost of prescription drugs. Part D is provided by private insurers, which also means that premiums will vary widely. Additionally, those who use Medicare Part C or Medigap may find a plan that includes prescription drug coverage, making Part D unnecessary.
How to Deduct Medicare Premiums
Are Medicare premiums tax-deductible? Every medical expense you pay may be deducted from your annual taxes, though there are some requirements and restrictions that taxpayers will have to navigate.
Requirements & Restrictions
Generally, the IRS will allow you to deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI). So, for example, if your AGI was $40,000 for the year, your medical expenses have to exceed $3,000 in order to make the deduction.
What if your Medicare premiums don’t add up to the required figure? You might still be able to deduct these premiums if your total medical expenses rose above this 7.5% threshold. Remember, the IRS will allow you to deduct a variety of expenses, including:
This means that even if your Medicare expenses don’t meet the 7.5% requirement, you may still be able to deduct these premiums if your total medical expenses are sufficiently high.
What if I’m Self-Employed?
Self-employed professionals can deduct Medicare premiums before taxes, a practice referred to as an “above the line” deduction. This will lower your AGI, which can make it easier to meet the 7.5% threshold.
To be clear, this is an option, not a requirement. Some self-employed individuals might not deduct these premiums pre-tax, but instead, list them as itemized deductions on Schedule A at tax time. The advantages of each option depend entirely on your annual income and the amount you’ve spent on medical expenses. However, the IRS does allow you to deduct Medicare premiums pre-tax for your spouse as well.
What You’ll Need
As with any deduction, you’ll need to be sure to maintain the proper documentation in order to validate these deductions. Specifically, you’ll need at least three types of documents:
Medicare summary notice
Any additional bills
The SSA-1099 is a form you receive if you pay your Medicare premiums through Social Security. This document records the premiums you paid for Medicare Part B, and you can itemize these premiums once you file your tax return.
A Medicare summary notice is sent to Medicare users every three months. This document records all the services you’ve received, what Medicare paid for these services, and what was billed to you directly. Those who have an online MyMedicare account can access this information at any time.
You’ll receive separate Medicare summary statements from each part of Medicare you use. Your Medicare A statement may list your premium if you paid one, and some will also receive statements for Medicare Part C, D, or the Medigap plan. Others, however, pay for these plans from their Social Security, in which case these additional parts will be reflected on your SSA-1099.
You can always call your insurance provider directly for a report on your expenses which can be used for tax purposes.
Finally, you’ll want copies of any bills or receipts that record the cost of services that Medicare doesn’t cover. These expenses can include:
Again, as long as the total amount spent on medical expenses exceeds 7.5% of your AGI, you can deduct your Medicare premiums.
How to Make Your Deduction
Now that you understand the rules and requirements, let’s walk through the steps to making these deductions:
Calculate your AGI (total income minus your taxes)
Gather your SSA-1099, summary notices, insurance paperwork, and receipts
Add up your total medical expenses for the year
Use IRS Form 1040 or 1040-SR
Enter your medical expenses on lines 1 through 4
If your expenses meet the 7.5% requirement, you can make your deduction
The forms themselves walk you through the particulars of these deductions, but when in doubt contact a tax professional with any concerns.
Conclusion: Flourishing with a Fixed Income
Are Medicare premiums tax-deductible? As we’ve seen, all medical expenses can be deducted from your annual taxes, provided they exceed 7.5% of your AGI. This is good news for retirees and others living on a fixed income, allowing them to hold on to their limited assets and make the most of their retirement years.