I’m 18 years old and a resident of New York State. I earn approximately $60,000 annually after taxes, and my income is exempt from state income taxes. Unfortunately, my employer doesn’t provide any benefits, including health insurance, so we’re responsible for purchasing our own policies. I explored the New York State of Health marketplace and selected a HealthFirst plan. However, I’m considering switching to another plan, which would cost around $500 to $1,200 per month. I’m curious to know if the premiums I pay for my health insurance, whether obtained through the marketplace or directly from the insurance company, are tax deductible.
As an 18-year-old with a marketplace plan, am I eligible for tax deductions on my insurance premiums?
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Yes, health insurance premiums can be deductible as medical expenses, but only if your medical expenses are more than 7.5% of your AGI and you itemize deductions – in that case the amount of medical expenses that is above 7.5% of AGI can be included in itemized deductions. For most people, the math doesn’t work and they are better off with the standard deduction.
One exception: if you are self-employed, you can deduct the cost of your health insurance without regard to these limits, up to the amount of your net self-employment income.
Depending on your state, there may also be a state tax deduction. I don’t know if that’s the case for New York. Edit to add: if your income is exempt in New York, a state tax deduction wouldn’t make a difference.
A way to make your health insurance tax deductible without needing it to be higher than a certain percent and itemizing, is by using a HSA. You get a plan with a high deductible, open a HSA, contribute to it, then pay for the insurance with the HSA money (or reimburse yourself for the cost, which is the same thing).