Many individuals overlook valuable insurance-based tax deductions that could lead to significant savings. By understanding these deductions, one can improve their financial health, especially during tax season. Insurance premiums and medical-related expenses may offer surprising opportunities for deductions if managed correctly.

Health Savings Accounts (HSAs)

Health Savings Accounts offer a triple tax benefit that is hard to overlook. Contributions to an HSA are tax-deductible, even for those who do not itemize deductions. Additionally, the account grows tax-deferred, and withdrawals for qualified medical expenses are tax-free.

Medical Expenses

Unreimbursed medical costs exceeding 7.5% of adjusted gross income (AGI) may be deductible. For instance, if you had a year filled with unexpected medical costs, this deduction could be beneficial. Examples of deductible expenses include treatments, prescriptions, or even necessary medical travel.

Deductions for the Self-Employed

Self-employed individuals can deduct premiums for health, dental, and long-term care insurance. Business-related insurance, like vehicle insurance for work purposes, is also deductible. Take, for example, a freelance graphic designer who uses their vehicle for client meetings or a small business owner paying for their team's dental coverage.

Disability Insurance

Self-employed individuals can deduct disability insurance premiums, but only if the policy covers business overhead expenses. It's important to note that personal disability insurance doesn’t qualify for this deduction.

Unemployment and Workers’ Compensation

Unemployment benefits are taxable, while workers’ compensation benefits generally are not. Accurate reporting is crucial to avoid tax discrepancies.

Qualified Life Insurance

Life insurance premiums are generally not deductible unless they are for business purposes. Take, for example, a company that offers life insurance coverage to a corporate officer. The policyholder must be an employee or corporate officer, and the business cannot be the beneficiary.

Maximizing insurance-based tax deductions requires awareness and careful documentation. Take a closer look at your insurance expenses and consult a tax professional to ensure you are leveraging all available deductions.

Have questions about your insurance coverage? Reach out today for policies that protect you and those you love.