It's Back To School Week! My daughter got contact lenses this week. That means I’ve been spending a lot of time with her in the bathroom. A lot. There’s been a great deal of hand washing and squealing. But I think we’re getting closer to her being able to do it herself. Or at least letting me do it without all of the flailing about.
She’s been begging for them for a bit since her glasses are tough to manage with her hockey mask. I balked initially. I had two concerns: infection and cost. It turns out that infection isn’t as much a risk as when I was a kid (hers are disposable so you just toss them out everyday) and the cost wasn’t bad at all since we have health insurance.
As small business owners, we pay our own health insurance. It is probably, after housing, the single most expensive cost of living expense in our family. And we’re not alone. More and more families are shouldering the cost of health care as fewer companies offer benefits and still others re-characterize employees as independent contractors in an effort to avoid laws which might require them to pay benefits.
Fortunately, the cost of health insurance is deductible if you itemize your deductions on federal form 1040. You report health insurance payments as part of your medical expenses claimed on a Schedule A. You can deduct expenses you pay for medical and dental care for yourself, your spouse, and your dependents. The amount that you can deduct is the excess of those expenses over 10% of your adjusted gross income (taxpayers age 65 and older may continue to use the older 7.5% threshold through December 31, 2016).
But what if you don’t pay for your own health insurance? Well, clearly you don’t take the deduction. But you don’t pay tax on those benefits either: if you receive health care insurance as a perk of your employment, the value of those benefits is generally excluded from income. They are are federal income tax-free to you.
The Affordable Care Act has changed the way that we pay for, deduct and report health care benefits.
For one, under the Affordable Care Act, group health plans and health insurance issuers that provide dependent coverage of children must continue to make such coverage available for an adult child until age 26. That coverage will continue to be excluded from gross income. You will, however, see your health care benefits reported on your form W-2 “for informational purposes only.” Again, this number does not affect your final tax bill.
Additionally, Section 162(l) has been amended to allow self-employed individuals to deduct amounts paid during the taxable year for insurance that constitutes medical care for the taxpayer, his or her spouse, and dependents under the age of 27. For purposes of health care benefits, self-employed individuals generally include sole proprietors, partners in a partnership, members of an LLC treated as a partnership for tax purposes, and shareholders who hold at least 2% of the stock of an S corporation.
The treatment of health care coverage will probably continue to make news as the provisions of the health care act get hammered out. For now, however, the tax treatment stays largely the same: employer provided health care benefits are federal income tax free and the rest of us can take a deduction.
Healthy vision association discounts
Some plans can only be accessed through membership in the Healthy Vision Association (HVA), which helps its members see well and stay healthy.
For $1.50/mo, your membership will give you access to exclusive discount programs* on everyday goods and services including:
Plus, your membership supports vision-related charities too.
*All rebates and special offers are subject to change