- Medicare expenses, including Medicare premiums, can be tax deductible.
- You can deduct all medical expenses that are more than 7.5 percent of your adjusted gross income.
- Most people can’t deduct their Medicare premiums pretax, unless they’re self-employed.
Premiums are one of the many medical expenses the IRS allows you to deduct from your taxes each year. This includes the premiums you pay for Medicare.
You generally can’t deduct your premiums pretax, but you can include them in your yearly itemized deductions.
The IRS allows you to deduct any amount you spend on your own medical care — including your Medicare premiums — that’s more than 7.5 percent of your income.
Many health insurance premiums are tax deductible, including the ones you pay for Medicare.
But unlike premiums for insurance plans you get through an employer, Medicare premiums are generally not considered pretax. Pretax deductions are those taken out of your wages before it’s taxed.
For example, if you have a plan through your employer that costs $85 per paycheck, that $85 is taken out of your total pay before taxes are. So, if your total check was $785, you’d have $85 taken out for insurance. Then, you’d pay taxes on the remaining $700.
Your Medicare premiums, however, won’t be taken out pretax. You’ll need to deduct them when you file your taxes instead. This is the case even if you pay your premiums by having the money deducted from your Social Security retirement benefits check.
The rules for deduction depend on your specific circumstances, including your income and employment status. Your income and circumstances can also affect which Medicare premiums you’re able to deduct.
In general, you can deduct:
- Part A premiums. Most people get Part A without paying a premium, so there isn’t anything to deduct. If you do pay a Part A premium and aren’t getting any Social Security benefits, you can deduct the premium.
- Part B premiums. Part B premiums are tax deductible as long as you meet the income rules.
- Part C premiums. You can deduct Part C premiums if you meet the income rules.
- Part D premiums. As with parts B and C, you can deduct your Part D premiums if you meet the income rules.
- Medigap. Medigap premiums can also be tax deductible.
If you pay your premiums through Social Security, you’ll receive a form each year called SSA-1099. The SSA-1099 will show the premiums you paid for Part B, and you can use this information to itemize your premiums when you file your taxes.
You’ll also receive a form from Medicare called a Medicare summary notice. A summary notice lists all the services you received, what Medicare paid for them, and the amount billed to you.
Medicare sends you a summary notice every 3 months. If you have a myMedicare account, you can get the same information at any time.
You can use the information on your SSA-1099 and your summary notices to calculate the amount you paid in Medical expenses. The IRS allows you to include costs for services that original Medicare (parts A and B) doesn’t cover, such as:
Keep your bills and receipts from these services. You’ll need them to figure out your total medical expenses for the year. When you file your taxes, you’ll list these expenses, along with your premiums, as what’s called an itemized Schedule A deduction.
What if I have a Part C, Part D, or Medigap plan?
You’ll receive separate statements from any privately sold Medicare plan you have — including Part C, Part D, and Medigap — unless you pay for any of them out of your Social Security benefits.
If you pay using Social Security, you’ll receive information on an SSA-1099. Otherwise, you’ll receive a statement from your insurance company. Call your insurance company if you haven’t received the information you should.
As a general rule, the IRS allows you to deduct any medical expenses that exceed 7.5 percent of your adjusted gross income (AGI). Your AGI is the amount you make in a year after all taxes are taken out. This includes the deductibles you pay for Medicare or any other insurance.
Your ability to deduct your premiums depends on your AGI and the amount you pay for your premiums.
For example, let’s say your AGI was $20,000. You can deduct any medical expense that is more than 7.5 percent of your income. In this case, that’s $1,500.
Then let’s say you choose to use original Medicare (parts A and B), and you receive Part A premium-free. You pay the standard Part B premium of $144.60.
Even if you had no other medical expenses, 12 months of Part B premiums is $1,735.20. This means you could deduct $235.20 of the money you paid for Part B premiums from your taxes.
You might have also spent money on medical expenses like:
- noncovered services
If so, you can deduct even more from your taxes.
Remember, you can deduct any medical expense you pay that’s more than 7.5 percent of your income. That means you’ll need to add up all the expenses from your SSA-1099, summary notices, and any receipts, so you can figure out how much you paid toward your medical care during the tax year.
Your healthcare deductions work differently if you’re self-employed. Self-employed beneficiaries can deduct their premiums before taxes. This is known as an “above the line” deduction.
Taking out premiums before taxes lowers your AGI, which can allow you to deduct even more medical expenses. Plus, the IRS allows you to deduct your Medicare premiums pretax for your spouse as well.
You’re considered self-employed if you own a business that earns income, even if you’re a sole proprietor.
So, for example, if you’re doing freelance consulting work in retirement, you could deduct your Medicare premiums pretax. If your business didn’t earn you any income, though, you can’t deduct your benefits pretax.
For most people, deducting premiums pretax means serious tax savings, but that might not be the case in all situations. You can choose to not deduct your premiums pretax and instead deduct them as itemized Schedule A deductions at tax time.
If you’re self-employed, you can use online tools to see what taxes would be like with pretax versus itemized deductions.
If you’re still working for an employer but have Medicare, you can use Schedule A to deduct your premiums. You can itemize all your medical expenses, including premiums. The same AGI rules will apply, no matter your income source.
You can deduct your Medicare premiums in a few steps. It’s important to take your time on each step to make sure you don’t miss out on any tax savings.
Here are the steps for discovering the amount you can deduct for your healthcare expenses:
- Determine your AGI for the year.
- Gather all medical receipts, your SSA-1099, summary notices, and insurance statements.
- Add up the money you spent on your own healthcare for the year.
- Use IRS Form 1040 or 1040-SR.
- Enter your Medical expenses on lines 1 through 4 of the Form 1040 or 1040-SR. The form will walk you through calculating 7.5 percent of your AGI, then subtracting that number from your total medical expenses.
- You can deduct the amount you paid for medical expenses that’s more than 7.5 percent of your AGI.
For example, say you have an AGI of $40,000. When you add up all your medical expenses from your SSA-1099, summary notices, receipts, and other statements, you get a total of $6,000.
So, you could deduct $3,000 of those medical expenses: 7.5 percent of $40,000 is $3,000, and $6,000 minus $3,000 is $3,000.
How to find help with your taxes if you’re on Medicare
The following resources can help with your taxes or give you more information:
- Tax Counseling for the Elderly (TCE). The TCE provides free tax preparation help from IRS-certified volunteers. You can find a local office by calling 888-227-7669.
- Volunteer Income Tax Assistance (VITA). Like the TCE, this service provides free tax preparation help. You can reach them by calling 800-906-9887.
- IRS service locator. You can find local TCE or VITA providers on the IRS website.
- Taxpayer Assistance Centers (TACs). You can make an appointment at TACs to get answers to your questions.
- You can deduct your Medicare premiums and other medical expenses from your taxes.
- You can deduct premiums you pay for any part of Medicare, including Medigap.
- You can only deduct amounts that are more than 7.5 percent of your AGI.
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