ComPro Insurance – Health Insurance & Taxes

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Health Insurance & Taxes

As the 2021 tax deadline approaches for personal tax returns, here are good reminders:
You may have received a Form 1095—there are the versions—1095A, 1095B, 1095C. The purpose of the 1095 is to report health insurance information to you and to the IRS. Not everyone will receive a 1095.
  • 1095A – This is used by the Health Insurance Marketplace to report information on enrollment in an individual health insurance plan. You would receive this form if you enrolled through for any portion of 2020. 1095A reports the amount of Premium Tax Credit that you used each month and is used in the preparation of your federal tax return to determine whether a refund is due, or a repayment of Premium Tax Credit is required. It is important that you submit this with your tax return.
  • 1095B –  This is used by health insurance companies, government plans such as Medicare and Medicaid, and some self-insured employers. It documents that you had “minimum essential coverage.”  Prior to 2019, this information was used to determine if you would be subject to a tax penalty for NOT having health insurance coverage. This tax penalty has been waived. 1095B is simply an information return now. It does not need to be filed with your tax return.
  • 1095C – This is used by employers with 50 or more full-time employees to report information about the minimum essential coverage offered through a group health insurance plan. This is also an information return and is not filed with your tax return.
HSA Contributions—You can contribute to a Health Savings Account until the tax filing deadline and receive a deduction for the PREVIOUS tax year. HSA contributions lower your Adjusted Gross Income and provide a tax benefit by lowering your overall tax bill. The maximum HSA contribution for 2020 is $3,550 for an individual or $7,100 for a family. The 2021 limits are $3,600 individual/$7,200 family. An adult that is 55 or older can contribute an extra $1,000 per year.
Self Employed Health Insurance Deduction—If you are self-employed, you may be eligible to deduct premiums that you pay for medical, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. Like an HSA, the deduction lowers Adjusted Gross Income. The deduction cannot exceed the earned income that you report from your business.
Medical Expense Deduction—Your unreimbursed medical expenses can be deducted but only the amount that exceeds 7.5% of your adjusted gross income. It is an itemized deduction. This could be helpful in a year where you incurred substantial medical bills but may not be advantageous at any other time.
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