Medicare and Taxes: How Will Your 2021 Tax Return Affect Your 2023 Medicare Premiums? March 22, 2022 08:53
As you begin the process of filing your 2021 taxes, keep in mind that what you put on a completed Form 1040 will have an impact on the premiums you pay in 2023.
Here's what you should know:
Self-employed people can deduct their health insurance premiums as a "above the line" deduction on Schedule 1 of the 1040 form (which lowers their AGI). If you own a business as a sole proprietor (Schedule C), partner (Schedule E), limited liability company (LLC) member, or S corporation shareholder and own at least 2% of the company stock, you are considered self-employed by the IRS.
If you are not self-employed, you can deduct Medicare premiums by itemizing deductions on Schedule A. Out-of-pocket medical expenses that exceed 7.5 percent of your AGI can be included if you plan to itemize.
Part B of Medicare covers medical visits, including services deemed necessary or preventive, and is part of "Original Medicare" (along with Medicare Part A). This means that if you are within three months of turning 65, you are automatically eligible for Part B coverage.
Prescription drugs are covered under Medicare Part D. It is not included in the original Medicare plan. As a result, any prescription drug coverage you receive while on Medicare must be purchased in addition to "Original Medicare" or your chosen Medicare Advantage or Supplement plan.
At the end of the day, when it comes to the complicated world of tax filing, it pays to understand the implications of your filing for the present and the future. More importantly, knowing if you qualify for any possible deductions is beneficial. With Medicare premiums on the rise, this is something that should not be overlooked.